UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010o

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 000-30941

AXCELIS TECHNOLOGIES, INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction
of incorporation or organization)

34-1818596(IRS Employer Identification No.)


108 Cherry Hill Drive
Beverly, Massachusetts 01915(Address of principal executive offices) (zip code)

(978) 787-4000(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registeredCommon Stock, $.001 par value

The Nasdaq Stock Market LLCPreferred Share Purchase Rights


Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No ý

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 such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý No o

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, of any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. o

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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company ý


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No ý

Aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2010: $159,832,246

Number
of shares outstanding of the registrant's Common Stock, $0.001 par value, as of March 14, 2011: 106,012,734.

Documents incorporated by reference:

Portions of the definitive Proxy Statement for Axcelis Technologies, Inc.'s Annual Meeting of Stockholders to be
held on April 26, 2011 are incorporated by reference into Part III of this Form 10-K.



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PART I

Item 1.    Business.

Overview of Our Business

Axcelis Technologies, Inc. ("Axcelis," the Company," "we," "us," or "our") designs, manufactures and services ion implantation,
dry strip and other processing equipment used in the fabrication of semiconductor chips. We sell to leading semiconductor chip manufacturers worldwide. The ion implantation business comprised
approximately 84.4% of our revenue in 2010 with the remaining 15.6% of revenue derived from our dry strip and other processing systems. In addition to equipment, we provide extensive aftermarket
service and support, including spare parts, equipment upgrades, maintenance services and customer training.

Axcelis,
which was incorporated in Delaware in 1995, is headquartered in Beverly, Massachusetts. We maintain an Internet site at http://www.axcelis.com. We make available free of charge
on and through this website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the
Securities and Exchange Commission. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this Form 10-K.

Industry Overview

Semiconductor chips, also known as integrated circuits, are used in personal computers, telecommunication equipment, digital consumer
electronics, wireless communication products and other applications. Types of semiconductor chips include memory chips (which store and retrieve information), microprocessors (logic devices which
process information) and "system on chip" devices (which have both logic and memory features). Most semiconductor chips are built on a wafer of silicon of either 200mm (8 inches) or 300mm (12 inches)
in diameter. Each semiconductor chip is made up of millions of tiny transistors or "switches" to control the functions of the device. Transistors are created in the silicon wafer by introducing
various precisely placed impurities into the silicon in specific patterns. The process steps in the formation of transistors are traditionally referred to as
"front-end-of-line." The "back-end-of-line" process steps connect the transistors and other components together through several
overlapping layers of metal wires, known as interconnect, creating a complete circuit. Each layer of metal interconnect must be separated by a non-conductive or insulating material called
inter-level dielectric. Each layer that is added is selectively patterned to all previous layers through a process called photolithography.

Semiconductor
chip manufacturers utilize many different types of equipment in the making of integrated circuits. There are over 300 process steps utilizing over 50 different types of
process tools required in the making of a single device like a microprocessor. Semiconductor chip manufacturers seek efficiency improvements through increased throughput, equipment utilization and
higher manufacturing yields. Capacity is added by increasing the amount of manufacturing equipment in existing fabrication facilities and by constructing new fabrication facilities. Periodically the
semiconductor industry adopts a larger silicon wafer size to achieve lower manufacturing costs. Semiconductor manufacturers can produce more chips on a larger wafer, thus reducing the overall
manufacturing cost per chip. For example, the use of 200mm wafers in production began at the end of the 1980s. The migration from 200mm to 300mm began at the end of the 1990s. The majority of wafer
fabrication facilities today are using wafers with a diameter of 300mm. In 2010, Axcelis derived 87.2% of total systems revenue (a component of product revenue) from sales of 300mm equipment.

The
customer base is also changing. Given the magnitude of the investment needed to build a new wafer fabrication facility (often referred to as a "fab"), which can be over
$4 billion for a new

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300mm fab,
many customers are entering into partnerships to offset the cost of technology development and manufacturing. In addition, many chip developers outsource all or part of their chip
manufacturing requirements to contract manufacturers, known as foundries. Foundries are significant purchasers of semiconductor manufacturing equipment.

Historically,
the semiconductor industry has grown on an annual basis. However, the industry has also been highly cyclical, as global chip production capacities successively exceed, then
lag behind, global chip demand. When chip demand is high, and inventories low, chip manufacturers add capacity though capital equipment purchases. Given the difficulties of forecasting and calibrating
chip demand and production capacity, the industry periodically experiences excess chip inventories and softening chip prices. Our customers react with muted capital spending, lowering the demand for
our equipment. Changes in consumer and business demand for products in which chips are used also affect the industry.

During
the last six months of 2007 through 2009 challenging market conditions severely limited our ability to increase sales and market share. During this period, adverse market
conditions such as credit constriction, higher unemployment, lower corporate earnings, lower business investment and lower consumer spending severely impacted many technology manufacturers and
significantly lowered the demand for our products. A successful semiconductor equipment manufacturer must not only provide some of the most technically complex products manufactured in the world but
also must design its business to thrive during the inevitable low points in the cycle. During 2010 the Company benefited from improved market conditions and increased capacity utilization at
customers' manufacturing facilities. Industry forecasts project this positive trend to continue into 2011.

Axcelis' Strategy

Our mission and vision is to:



Operationally,
we manage our business based on three main tenets:



We
have continued to invest in research and development through the industry cycles to assure our products meet the needs of our customers. We continue to add to our portfolio of patents
and unpatented proprietary technology to ensure that our investment in technology leadership is translated into unique product advantages. We take pride in our scientists and engineers who comprise
over one-third of our workforce. We strive for operational excellence by focusing on ways to lower our manufacturing and design costs and to improve our delivery times to our customers.
Finally, we have grown and improved our customer support infrastructure and have established Global Customer Teams and a focused account management structure to strengthen our customer relationships
and increase customer satisfaction.

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Ion Implantation Systems

Ion implantation is a principal step in the transistor formation cycle of the semiconductor manufacturing process. An ion implanter is
a large, technically advanced machine that injects dopants such as arsenic, boron or phosphorus into a silicon wafer. These dopants are ionized and therefore have electric charges. With an electric
charge they can be manipulated, moved and accelerated with electric and magnetic fields. Ion implanters use these fields to create a beam of ions with a precisely defined amount of energy (ranging
between several hundred and three million electron-volts) and with a precisely defined amount of beam current (ranging from microamps to milliamps). Certain areas of the silicon wafer are blocked off
by a polymer material known as photoresist, which acts as a "stencil" to pattern devices so that the dopants will only enter the wafer where needed. The dopants change the electrical properties of the
silicon wafer to create the active components of a chip, called the transistors. Typical process flows require twenty implant steps, with the most advanced processes requiring thirty or more. Each
implant step is characterized by four key parameters: dopant type, dose (amount of dopant), energy (depth into the silicon) and tilt (angle of wafer relative to the ion beam).

In
order to cover the wide range of implant steps, three different types of implanters have been developed, each designed to cover a specific range of applications, primarily defined by
dose and energy. The three traditional implanter types are referred to as medium current, high current and high energy:



Axcelis
offers a complete line of high energy, high current and medium current implanters for all application requirements.



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We
believe the Optima products will continue to meet customer demand for advantages in productivity, simplicity, process performance and technical extendibility.

Dry Strip

In the process steps prior to ion implantation, a light sensitive, polymer-based liquid called photoresist is spread in a uniformly
thin film on the wafer. Through a process known as photolithography, the photoresist is developed into a pattern like a stencil. Once the subsequent implant processes and etch steps (in which the top
layer of the surface of the wafer not covered by photoresist is removed) are completed, the photoresist is no longer necessary and must be removed. The primary means of removing photoresist and
residue is a process called "dry strip" or "ashing." Our dry strip machines, also called "ashers," use microwave and radio frequency energy to turn process gases into plasma, which then acts to
"clean" the surface of the wafer by removing the photoresist and unwanted residue.

Axcelis
offers a full line of dry strip tools that cover the entire range of customer applications. Our newest product, the Integra RS, was introduced in 2009 and brings significantly
higher productivity and flexibility to Axcelis' already proven advanced dry strip process capabilities. The Integra RS's unique multi-chamber design includes paired-chamber process modules that can
run production recipes with the highest throughputs available for leading edge memory and logic devices. Each of the chamber pairs can operate independently, giving users the choice of running
different cleaning recipes simultaneously or performing maintenance on one module while the others continue to operate. This flexibility makes the system ideal for a variety of advanced cleaning
applications in a high volume manufacturing environment. The platform also includes technology required to address cleaning challenges at emerging transistor device nodes, such as those associated
with advanced source/drain formation and high-k/metal-gate structures.

We
believe our dry strip products and technology will continue to meet customer demand for advantages in productivity, process performance and technical extendibility.

Other Processing Systems

Axcelis also provides aftermarket support for the installed base of thermal processing and photostabilization/curing systems
manufactured by Axcelis. In 2007 Axcelis ceased further development of these product lines.

Photostabilization/Curing SystemsIn some manufacturing processes, the photoresist stencil material spread on the wafer must be
hardened or "cured."
Axcelis' curing (also known as photostabilization) systems use proprietary ultraviolet light sources to cure the photoresist so the material maintains the desired pattern during the subsequent implant
processes and etch steps.

The
photostabilization and curing market has remained a small segment. In past years, Axcelis has explored growth opportunities for this product line in curing and drying new
low-k dielectric materials. To date, broad adoption of such materials has not occurred. In the fourth quarter of 2007, Axcelis

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determined
that the current and near term market opportunity for the curing product line did not justify continuing investment in these products. As a result, Axcelis decided to cease future product
development in curing to focus on profitable growth within the company's core ion implant and dry strip businesses.

Thermal Processing SystemsAt a number of points during the manufacturing process, silicon wafers need to be heated rapidly,
often to 900 degrees
centigrade or higher, in order to complete chemical or electronic reactions. This heating process is referred to as rapid thermal processing, or RTP. Our thermal processing systems employ a patented
design to process a single wafer in a hot wall vertical reactor. This technology differs from most other thermal processing equipment, which regulate temperature through a lamp-based
system. The RTP market is dominated by a single major competitor and, while the Axcelis RTP systems have technological advantages for certain applications, our penetration into the market remains low.
In the third quarter of 2007, Axcelis determined that the current and near term market opportunity for the RTP product line did not justify continuing investment in these products. As a result,
Axcelis decided to cease future product development in RTP to focus on profitable growth within the company's core ion implant and dry strip businesses.

Axcelis
has initiatives underway to seek ways to utilize our existing products in alternative markets such as solar and LED (Light-Emitting Diode). We are also evaluating technologies
and products that might enhance and extend our existing product portfolio.

Aftermarket Support and Services

We offer our customers extensive aftermarket service and support throughout the lifecycle of the equipment we manufacture. We believe
that approximately 3,000 of our products are in use in 30 countries worldwide. The service and support that we provide include spare parts, equipment upgrades, and maintenance services. We
provide service out of 32 field offices to customers located in 30 countries. Revenue generated through our service and support business represented about 51.7%, 73.8%, and 57.1% of revenue in
2010, 2009, and 2008, respectively.

We
have 412 staff, including sales and marketing personnel, field service engineers, and spare parts and applications engineers, as well as employees located at our manufacturing
facilities who work with our customers to provide customer training and documentation, product, process and applications support.

Most
of our customers maintain spare parts inventories for our machines. In addition to our web-based spare parts management and replenishment tracking program, we offer a
number of Business-to-Business options to support our customers' parts management requirements. AMI (Axcelis Managed Inventory) provides the customer with full spares support
through which Axcelis takes responsibility for the complete supply chain. The expansion of these services provides ease of use alternatives that help us reduce order fulfillment costs and improve
cycle time, resulting in an expanded customer base for this service offering. See Note 2 to our Consolidated Financial Statements contained in Item 15 of this
Form 10-K for a discussion of revenue classifications from our aftermarket business.

Sales and Marketing

We primarily sell our equipment and services through our direct sales force. We have 14 sales offices in 7 countries.
Aftermarket service and support is also offered at all of these offices. In the United States, we conduct sales and marketing activities from seven locations. Outside of the United States, our
sales offices are located in Taiwan, South Korea, China, Germany, Singapore and Italy. In addition, isolated sales are made in smaller markets through distributors and manufacturing representatives.

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In
Japan, SEN Corporation, or "SEN", has a non-exclusive license to use certain patented and unpatented technology associated with legacy products owned by the Company. This
license does not restrict our ability to sell any of our products in Japan. See Note 16 to our Consolidated Financial Statements contained in Item 15 of this Annual Report on
Form 10-K for further information regarding SEN. We support our products in Japan through a representative agreement with Applied Materials, Inc., which provides aftermarket
services and support services for our products.

International
revenue, including export sales from our U.S. manufacturing facilities to foreign customers, sales by foreign subsidiaries and branches, and royalties, accounted for 75.8%
of total revenue in 2010, 62.8% in 2009, and 64.7% in 2008. Substantially all of our sales are denominated in U.S. dollars. See Note 17 to our Consolidated Financial Statements contained in
Item 15 of this Form 10-K for a breakdown of our revenue and long-lived assets in the United States, Europe and Asia.

Customers

In 2010, the top 20 semiconductor manufacturers accounted for approximately 78.9% of total semiconductor industry capital spending, up
from 72.5% in 2009. These manufacturers are from the four largest semiconductor manufacturing regions in the world: the United States, Asia Pacific (Taiwan, South Korea, Singapore, and China), Japan
and Europe. The Company serves all leading semiconductor manufacturers. We believe that more than 4,000 of our products, including products shipped by our former Japanese joint venture prior to our
divestiture of that company in 2009, are in use worldwide.

Revenue
from our ten largest customers accounted for 62.7%, 56.6%, and 51.5% of revenue in 2010, 2009, and 2008, respectively. We expect that sales of our products to relatively few
customers will continue to account for a high percentage of revenue for the foreseeable future. In 2010, one customer accounted for 18.6% of revenue. In 2009, no customer accounted for more than 10%
of revenue.

Research and Development

Our industry continues to experience rapid technological change, requiring us to frequently introduce new products and enhancements.
Our ability to remain competitive in this market will depend in part upon our ability to develop new and enhanced systems and to introduce these systems at competitive prices on a timely and cost
effective basis.

We
devote a significant portion of our personnel and financial resources to research and development programs and seek to maintain close relationships with our customers to remain
responsive to their product needs. We have also sought to reduce the development cycle for new products through a collaborative process whereby our engineering, manufacturing and marketing personnel
work closely together with one another and with our customers at an earlier stage in the process. We also use 3D, computer-aided design, finite element analysis and other computer-based modeling
methods to test new designs.

Our
expenditures for research and development were $39.5 million, $32.7 million and $63.3 million in 2010, 2009, and 2008, respectively, or 14.4%, 24.6% and 25.3% of
revenue, respectively. We expect that research and development expenditures will continue to represent a substantial investment in future years.

Manufacturing

We manufacture products at our 417,000 sq. ft. ISO 9000:2008, ISO 14001:2004 certified plant in Beverly,
Massachusetts. Our facility employs best in class manufacturing techniques including lean manufacturing, six sigma controls and advanced inventory management, purchasing and quality systems.

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Our
clean manufacturing process uses class 1000/10,000 space to facilitate most of our manufacturing requirements.

Products
are designed to be assembled and tested in a modular fashion which facilitates our industry recognized ship-from-cell process. Specially developed test
stands, software and tooling provide the framework for this accelerated delivery process. Customers that choose ship-from-cell substantially improve their delivery times while
receiving the same high level of quality provided by more traditional longer cycle integration techniques. Product margins and inventory turns also improve as a result of shorter factory cycle times
and increased labor productivity.

Installation
of our equipment is provided by factory and field teams. The process includes placing and leveling the equipment at its installation site, connecting it to sources of gas,
water and electricity and recalibrating it to specifications that had previously been met during factory testing.

Our
supply chain team is globally focused and is located in Beverly and Singapore. Customized and commercially available software solutions drive our planning, purchasing and inventory
tracking process. Material is supplied from a number of sources that provide OEM or product built to our detailed specifications.

Core
manufacturing competency is built around system assembly and test which remains an in house capability due to the high degree of expertise and intellectual property associated with
the process and design. Non-core work is sourced to one of several global partners and includes items such as power distribution, vacuum systems, wafer handling and commodity level
components. We continuously pursue outsourcing opportunities where the economics are justified, with a goal of enabling factory capacity, quality and margin improvement.

Beverly,
Massachusetts is also the location of our Advanced Technology Center. This center houses a process development laboratory with 12,500 sq. ft. of
class 10/100/1000 clean room for product demonstrations and process development and a 34,000 sq. ft. customer training center. The Advanced Technology Center provides
infrastructure and process capabilities that allow customers to test their unique process steps on our product under conditions that substantially replicate the customers' production environment. This
facility also provides significant capability for our research and development efforts.

Competition

The semiconductor wafer fabrication equipment market is highly competitive and is characterized by a small number of medium to large
size participants. We compete in two principal product markets in both the front-end and back-end of the semiconductor wafer fabrication process: ion implantation and dry
strip. We believe that preexisting relationships have a significant influence on a customer's choice of equipment supplier. Other significant competitive factors in the semiconductor equipment market
include price, cost of ownership, equipment performance, customer support, breadth of product line, distribution and financial viability.

Ion Implantation.In ion implantation, we compete against Varian Semiconductor Equipment Associates, Inc., SEN, Nissin
Electric Co., Ltd. and AIBT.

Dry Strip.Our principal competitors in the dry strip product market are PSK, Inc., Mattson Technology Inc. and
Novellus
Systems, Inc.

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Intellectual Property

We rely on patent, copyright, trademark and trade secret protection, as well as contractual restrictions, in the United States and in
other countries to protect our proprietary rights in our products and our business. As of January 1, 2011, we had 248 patents issued in the United States and 245 patents granted in other
countries, as well as 528 patent applications (83 in the United States and 445 in other countries) on file with various patent agencies worldwide. Patents are generally in effect for up to
20 years from the filing of the application.

We
intend to file additional patent applications and grow our intellectual property portfolio as appropriate. Although patents are important to our business, we do not believe that we
are substantially dependent on any single patent or any group of patents.

We
have trademarks, both registered and unregistered, that are maintained to provide customer recognition for our products in the marketplace.

From
time to time, we enter into license agreements with third parties under which we obtain or grant rights to patented or proprietary technology. Except for our license agreement with
SEN (described above under "Sale of Investment"), we do not believe that any of our licenses are currently material to us.

We
can give no assurance that we, our licensors, licensees, customers or suppliers will not be subject to claims of patent infringement or claims to invalidate our patents, or that any
such claims will not be successful, requiring us to pay substantial damages or delete certain features from our products or both.

Backlog

As of December 31, 2010, our systems backlog (excluding deferred systems revenue) was $51.7 million, as compared to
$10.8 million as of December 31, 2009. Systems backlog including deferred systems revenue was $68.0 million and $16.5 million as of December 31, 2010 and 2009,
respectively. The increase in backlog is indicative of the overall trend toward recovery in the semiconductor equipment market. We believe it is meaningful to investors to include deferred systems
revenue as part of our backlog. Deferred systems revenue represents revenue that will be recognized in future periods based on prior shipments. Our policy is to include in backlog only those system
orders for which we have accepted purchase orders and typically are due to ship within six months. Backlog does not include orders received for our service business (spare parts, consumables and
service contracts) due to the turn rate associated with that business. Generally, orders for services or parts received during the quarter are performed or shipped within the same quarter. All orders
are subject to cancellations or rescheduling by customers with limited or no penalties. Due to possible changes in system delivery schedules, cancellations of orders, and delays in systems shipments,
our backlog at any particular date is not necessarily indicative of our actual sales for any succeeding period. In addition, our backlog at the beginning of a quarter typically does not include all
orders required to achieve our sales objectives for that quarter and is not a reliable indicator of our future sales.

Employees

As of December 31, 2010, we had 1,018 employees and 113 temporary staff worldwide, of which 862 work in North America, 201 in
Asia and 68 in Europe. We consider our relationship with our employees to be good. Our employees are not represented by a labor union and are not subject to a collective bargaining agreement. Some of
our European locations have formed work councils, which have certain information and discussion rights under applicable law.

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Environmental

We are subject to environmental laws and regulations in the countries in which we operate that regulate, among other things: air
emissions; water discharges; and the generation, use, storage, transportation, handling and disposal of solid and hazardous wastes produced by our manufacturing, research and development and sales
activities. As with other companies engaged in like businesses, the nature of our operations exposes us to the risk of environmental liabilities, claims, penalties and orders. We believe, however,
that our operations are in substantial compliance with applicable environmental laws and regulations and that there are no pending environmental matters that would have a material impact on our
business. We are ISO-14001 certified at our Beverly, MA facility.

Executive Officers of the Registrant

Mary G. Puma,53, has been our President and Chief Executive Officer since January 2002
and Chairman since 2005. From May 2000 until January 2002, Ms. Puma was our President and Chief Operating Officer, prior to which she served as a Vice President of Axcelis from February 1999.
In 1998, she became General Manager and Vice President of the Implant Systems Division of Eaton Corporation, a global diversified industrial manufacturer. In May 1996, she joined Eaton as General
Manager of the Commercial Controls Division. Prior to joining Eaton, Ms. Puma spent 15 years in various marketing and general management positions for General Electric Company.
Ms. Puma is a director of Nordson Corporation, North Shore Medical Center and Semiconductor Equipment and Materials International (SEMI).

Jay Zager, 61, became our Executive Vice President and Chief Financial Officer in January 2011. Prior to joining Axcelis, from 2007 until
2010, Mr. Zager was Executive Vice President and Chief Financial Officer at 3Com Corporation, a global enterprise networking solutions provider acquired by Hewlett Packard. From February 2005
until June 2007, Mr. Zager was Executive Vice President and Chief Financial Officer at Gerber Scientific, Inc., a supplier of automated manufacturing systems. Prior to joining Gerber,
Mr. Zager was Senior Vice President and Chief Financial Officer of Helix Technology Corp., a semiconductor equipment manufacturer, from February 2002.

Stephen G. Bassett,63, is our Executive Vice President, Finance, a position he has held since May 2005. Until January 2011,
Mr. Bassett was our Chief Financial Officer from April 2004. He was also Senior Vice President, Finance from 2004 until May 2005. Prior to that, Mr. Bassett had served as interim Chief
Financial Officer for Axcelis beginning in June 2003. From 1999 to 2002, Mr. Bassett served as Chief Financial Officer of Ezenia! Inc., a provider of real-time voice, video
and data collaboration solutions for corporate networks and the Internet. From 1996 to 1999, Mr. Bassett worked as an independent financial consultant. From 1981 until 1996, Mr. Bassett
served as an audit partner at
Ernst & Young LLP, where he managed auditing services for a variety of organizations, ranging from multinational Fortune 500 companies to emerging businesses.

Kevin J. Brewer,52, is our Executive Vice President, Manufacturing Operations, a position he has held since November 2008, prior to which
he had been Vice President of Manufacturing Operations since October 2002 and Director of Operations from 1999 to 2002. Prior to joining Axcelis in 1999, Mr. Brewer was Director of Operations,
Business Jets at Raytheon Aircraft Company, a leading manufacturer of business and special mission aircraft owned by Raytheon Company, a manufacturer of defense, government and commercial electronics,
as well as aircraft. Prior to that, Mr. Brewer held various management positions in operations and strategic planning in Raytheon Company's Electronic Systems and Missile Systems groups.

Lynnette C. Fallon,51, has been our General Counsel and corporate Secretary since 2001 and Executive Vice President, Human
Resources/Legal since May 2005. Prior to that, Ms. Fallon was Senior Vice President HR/Legal since 2002, and Senior Vice President since 2001. Before joining Axcelis,

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Ms. Fallon
was a partner in the Boston law firm of Palmer & Dodge LLP since 1992, where she was head of the Business Law Department from 1997 to 2001.

Matthew P. Flynn,54, is our Executive Vice President, Global Customer Operations, a position he has held since May 2005, prior to which
he was Vice President Global Customer Operations since October 2002. Before then, Mr. Flynn was Director of Sales, Ion Implant and RTP systems. Prior to joining Axcelis in 1996,
Mr. Flynn held executive and management roles at Cherry Semiconductor, an integrated circuit manufacturer, and at Teledyne Inc., in its microelectronics business.

William Bintz,54, has been our Senior Vice President, Marketing since September 2007. Mr. Bintz joined Axcelis in early 2006 as
Director of Marketing for curing and cleaning products and shortly thereafter became Vice President of Product Marketing where he expanded his responsibilities to include implant products as well.
Prior to joining Axcelis, from 2002 Mr. Bintz was Product Director for Medium Current and High Energy Ion Implant System at Varian Semiconductor Equipment Associates, Inc. Before that,
he was General Manager of the Materials Delivery Products Group at MKS Instruments, beginning in 1999, and General Manager of the Thermal Processing Systems Division at Eaton Corporation (now Axcelis)
beginning in 1995.

Item 1A.    Risk Factors.

Some of the matters discussed in this filing contain forward-looking statements regarding future events that are subject to risks and
uncertainties. From time to time, we may also make other forward-looking public statements, such as statements concerning our expected future revenue or earnings or concerning the prospects for our
markets or our product development, projected plans, performance, order procurement as well as other estimates relating to future operations. Forward-looking statements may be in reports filed under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in registration statements filed under the Securities Act of 1933, as amended (the "Securities Act"), in press releases or in
informal statements made with the approval of an authorized executive officer. The words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project,"
or similar expressions are intended to identify "forward-looking statements" within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act, as enacted by
the Private Securities Litigation Reform Act of 1995.

We
wish to caution you not to place undue reliance on these forward-looking statements. These statements speak only as of the date on which they are made and represent management's
expectations based on information available to them at that time. The factors listed below, as well as other factors that we may or may not have currently identified, could affect our financial or
other performance and could cause our actual results for future periods to differ materially from opinions or statements expressed with respect to future periods or events in any current statement.

We
will not undertake, and specifically decline, any obligation to publicly release revisions to these forward-looking statements to reflect either circumstances after the date of the
statements or the occurrence of events that may cause us to re-evaluate our forward-looking statements, except as may be required by law.

Important
factors that could cause our actual results to differ materially from those projected in any forward-looking statements or that may otherwise be made by us or on our behalf and
that make an investment in our securities risky include, but are not limited to: the cyclical nature of the semiconductor industry, whether we can keep pace with rapid technological changes in the
semiconductor manufacturing processes, the highly competitive nature of the semiconductor equipment industry, and quarterly fluctuations in operating results attributable to the timing and amount of
orders for our products and services, as well as the other risk factors, discussed below. If any of those risk factors actually occurs, our business, financial condition and results of operations
could be seriously harmed and the trading price of our common stock could decline.

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We may be unable to obtain needed additional capital to finance our operations.

Our capital requirements may vary widely from quarter to quarter, depending on, among other things, capital expenditures, fluctuations
in our operating results, financing activities, acquisitions and investments and inventory and receivables management. We believe that our existing cash and cash equivalents will be sufficient to
satisfy our anticipated cash requirements through the end of 2011 and beyond, but this, of course, depends on the accuracy of our assumptions about levels of sales and expenses. A number of factors,
including those described in these "Risk Factors," could prove our assumption wrong and cause us to require additional capital from external sources. Depending on market conditions, future debt or
equity financings may not be possible on attractive terms or at all. In addition, future debt or equity financings could be dilutive to the existing holders of our common stock.

If semiconductor manufacturers do not make sufficient capital expenditures, our sales and profitability will be harmed.

Almost all of our new orders will depend upon demand from semiconductor manufacturers who build or expand fabrication facilities. When
the rate of construction or expansion of fabrication facilities declines, demand for our systems will decline, reducing our revenue. Revenue decline also hurts our profitability because our fixed cost
structure and our continued investments in engineering, research and development and marketing necessary to develop new products and to maintain extensive customer service and support capabilities
limit our ability to reduce expenses in proportion to declining sales.

Our financial results may fluctuate significantly.

We derive most of our revenue from the sale of a relatively small number of expensive products to a small number of customers. The list
prices on these products range from $0.2 million to $5.0 million. At our current sales level, each sale, or failure to make a sale, has a material effect on us in a particular quarter.
In a given quarter, a number of factors can adversely affect our revenue and results, including changes in our product mix, increased fixed expenses per unit due to reductions in the number of
products manufactured, and higher fixed costs due to increased levels of research and development and expansion of our worldwide sales and marketing organization. Our financial results also fluctuate
based on gross profit realized on sales. A variety of factors may cause gross profit as a percentage of revenue to vary, including the mix and average selling prices of products sold, costs to
manufacture and customize systems and warranty costs. New product introductions may also affect our gross margins. Fluctuations in our results may have an adverse effect on the price of our common
stock.

Our financial results may fall short of anticipated levels; forecasting revenue and profitability is complex and may be inaccurate.

Management may from time to time provide financial forecasts. These forecasts are based on assumptions believed to be reasonable when
made of shipment timing and contract terms. However, in some cases, the final customer terms may not have been agreed and documented at the time the forecast is made, so the level of revenue
recognizable in a particular quarter may vary from the forecast. Our lengthy sales cycle, coupled with customers' competing capital budget considerations, make the timing of customer orders uneven and
difficult to predict. In addition, our backlog at the beginning of a quarter typically does not include all orders required to achieve our sales objectives for that quarter and is not a reliable
indicator of our future sales. As a result, our revenue and operating results for a quarter depend on our shipping orders as scheduled during that quarter, receiving customer acceptance of shipped
products during the quarter, and obtaining new orders for products to be shipped in that same quarter. Any delay in, or cancellation of, scheduled shipments and customer acceptances or in shipments
from new orders could materially and adversely affect our financial results.

11

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Accounting
rules addressing revenue recognition have added additional complexity in forecasting quarterly revenue and profitability. Orders for our products usually contain multiple
delivery elements that result in revenue deferral under generally accepted accounting principles. Due to the foregoing factors, investors should understand that our actual financial results for a
quarter may vary significantly from our forecasts of financial performance for that quarter. Failure to meet forecast financial performance may have an adverse effect on the price of our common stock.

The semiconductor industry is highly cyclical and we expect that demand for our products will regularly increase and decrease, making it difficult to manage the business and
potentially causing harm to our sales and profitability.

The semiconductor business is highly cyclical, experiencing upturns when the demand for our products is high and downturns when our
customers are not investing in new or expanded fabrication facilities. From time to time, inventory buildups in the semiconductor industry, resulting in part from periodic downturns, produce an
oversupply of semiconductors. This will cause semiconductor manufacturers to revise capital spending plans, resulting in reduced demand for capital equipment such as our products. If an oversupply is
not reduced by increasing demand from the various electronics industries that use semiconductors, which we cannot accurately predict, our sales and profitability will be harmed. Our revenue can vary
significantly from one point in the cycle to
another, making it difficult to manage the business, both when revenue is increasing and when it is decreasing. In addition, a substantial portion of our operating expenses are fixed and do not
fluctuate with changes in volume. Significant decreases in revenue can therefore have a disproportionate effect on profitability.

If we fail to develop and introduce reliable new or enhanced products and services that meet the needs of semiconductor manufacturers, our results will suffer.

Rapid technological changes in semiconductor manufacturing processes require us to respond quickly to changing customer requirements.
Our future success will depend in part upon our ability to develop, manufacture and successfully introduce new systems and product lines with improved capabilities and to continue to enhance existing
products. This will depend upon a variety of factors, including new product selection, timely and efficient completion of product design and development and of manufacturing and assembly processes,
product performance in the field and effective sales and marketing. In particular:



Our
failure to meet any of these requirements will have a material adverse effect on our operating results and profitability.

12

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If we fail to compete successfully in the highly competitive semiconductor equipment industry, our sales and profitability will decline.

The market for semiconductor manufacturing equipment is highly competitive and includes companies with substantially greater financial,
engineering, manufacturing, marketing and customer service and support resources than we have that may be better positioned to compete successfully in the industry. In addition, there are smaller,
emerging semiconductor equipment companies that provide innovative systems with technology that may have performance advantages over our systems. We expect our competitors to continue to improve the
design and performance of their existing products and processes and to introduce new products and processes with improved price and performance characteristics. If we are unable to improve or
introduce competing products when demanded by the markets, our business will be harmed. In addition, if competitors enter into strategic relationships with leading semiconductor manufacturers covering
products similar to those sold or being developed by us, our ability to sell products to those manufacturers may be adversely affected. Finally, if we must lower prices to remain competitive without
commensurate cost of goods savings, our gross margins and profitability will be adversely affected.

We have been dependent on sales to a limited number of large customers; the loss of any of these customers or any reduction in orders from them could materially affect our
sales.

Historically, we have sold a significant portion of our products and services to a limited number of fabricators of semiconductor
products. For example, in 2010, our top ten customers accounted for 62.7% of our net sales. None of our customers has entered into a long-term agreement requiring it to purchase our
products. Although the composition of the group comprising our largest customers has varied from year to year, the loss of a significant customer or any reduction or delays in orders from any
significant customer could adversely affect us. The ongoing consolidation of semiconductor manufacturers may also increase the harmful effect of losing one or more significant customers.

Axcelis is subject to the risks of operating internationally and we derive a substantial portion of our revenue from outside the United States, especially from Asia.

We are substantially dependent on sales of our products and services to customers outside the United States. International sales,
including export sales from our U.S. manufacturing facilities to non-U.S. customers and sales by our non-U.S. subsidiaries and branches, accounted for 75.8% of total revenue in
2010, in comparison to 62.8% in 2009 and 64.7% in 2008. System shipments to Asian customers represented 68% of total shipment dollars in 2010 in comparison to 76% of total shipment dollars in 2009. We
anticipate that international sales will continue to account for a significant portion of our revenue. Because of our dependence upon international sales, our results and prospects may be adversely
affected by a number of factors, including:



13

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We may not be able to maintain and expand our business if we are not able to hire, retain and integrate qualified personnel.

Our business depends on our ability to attract and retain qualified, experienced employees. There is substantial competition for
experienced engineering, technical, financial, sales and marketing personnel in our industry. In particular, we must attract and retain highly skilled design and process engineers. Competition for
such personnel is intense, particularly in the Boston metropolitan area, as well as in other locations around the world. If we are unable to retain our existing key personnel, or attract and retain
additional qualified personnel, we may from time to time experience levels of staffing inadequate to develop, manufacture and market our products and perform services for our customers. As a result,
our growth could be limited or we could fail to meet our delivery commitments or experience deterioration in service levels or decreased customer satisfaction, all of which could adversely affect our
financial results.

Our dependence upon a limited number of suppliers for many components and sub-assemblies could result in increased costs or delays in the manufacture and sale of
our products.

We rely to a substantial extent on outside vendors to manufacture many of the components and sub-assemblies of our
products. We obtain many of these components and sub-assemblies from either a sole source or a limited group of suppliers. Accordingly, we may be unable to obtain an adequate supply of
required components on a timely basis, on price and other terms acceptable to us, or at all.

In
addition, we often quote prices to our customers and accept customer orders for our products before purchasing components and sub-assemblies from our suppliers. If our
suppliers increase the cost of components or sub-assemblies, we may not have alternative sources of supply and may not be able to raise the price of our products to cover all or part of
the increased cost of components.

The
manufacture of some of these components and sub-assemblies is an extremely complex process and requires long lead times. As a result, we have in the past and may in the
future experience delays or shortages. If we are unable to obtain adequate and timely deliveries of our required components or sub-assemblies, we may have to seek alternative sources of
supply or manufacture these components internally. This could delay our ability to manufacture or to ship our systems on a timely basis, causing us to lose sales, incur additional costs, delay new
product introductions and suffer harm to our reputation.

Our international operations involve currency risk.

Substantially all of our sales are billed in U.S. dollars, thereby reducing the impact of fluctuations in foreign exchange rates on our
results. Operating margins of certain foreign operations can fluctuate with changes in foreign exchange rates to the extent revenue is billed in U.S. dollars and operating expenses are incurred in the
local functional currency. During the year ended December 31, 2010, approximately 24% of our revenue was derived from foreign operations with this inherent risk. In addition, at
December 31, 2010, our operations outside of the United States accounted for approximately 34% of our total assets, the majority of which was denominated in currencies other than the U.S.
dollar.

Our stock price has been volatile and you could lose the value of your investment.

Our stock price has been volatile and has fluctuated significantly to date. The trading price of our stock is likely to continue to be
highly volatile and subject to wide fluctuations. Your investment in our

14

---



stock
could lose value. Some of the factors that could significantly affect the market price of our stock include:



The
stock market in general has experienced extreme price fluctuations.

Our proprietary technology may be vulnerable to efforts by competitors to challenge or design around, potentially reducing our market share.

We rely on a combination of patents, copyrights, trademark and trade secret laws, non-disclosure agreements and other
intellectual property protection methods to protect our proprietary technology. Despite our efforts to protect our intellectual property, our competitors may be able to legitimately ascertain the
non-patented proprietary technology embedded in our systems. If this occurs, we may not be able to prevent their use of this technology. Our means of protecting our proprietary rights may
not be adequate and our patents may not be sufficiently broad to prevent others from using technology that is similar to or the same as our technology. In addition, patents issued to us have been, or
might be challenged, and might be invalidated or circumvented and any rights granted under our patents may not provide adequate protection to us. Our competitors may independently develop similar
technology, duplicate features of our products or design around patents that may be issued to us. As a result of these threats to our proprietary technology, we may have to resort to costly litigation
to enforce or defend our intellectual property rights. Finally, all patents expire after a period of time (in the U.S., patents expire 20 years from the date of filing of the patent
application). Our market share could be negatively impacted by the expiration of a patent which had created a barrier for our competitors.

Axcelis
also has agreements with third parties for licensing of patented or proprietary technology with Axcelis as the licensor or the licensee. Termination of license agreements could
have an adverse impact on our financial performance or ability to ship products with existing configurations.

We (or customers that we indemnify) might face intellectual property infringement claims or patent disputes that may be costly to resolve and, if resolved against us, could
be very costly to us and prevent us from making and selling our systems.

From time to time, claims and proceedings have been or may be asserted against us relative to patent validity or infringement matters.
We typically agree to indemnify our customers from liability to third parties for intellectual property infringement arising from the use of our products in their intended manner. Therefore, we
occasionally receive notification from customers who believe that we owe them indemnification or other obligations related to infringement claims made against the customers by third parties. Our
involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets, even if the claims are without merit, could be very expensive to defend and could divert
the attention of our management. Adverse determinations in any litigation could subject us to significant liabilities to third parties, require us to seek costly licenses from third parties and
prevent us from manufacturing and selling our systems. In addition, infringement indemnification clauses in system sale agreements may require us to take other actions or require us to provide certain
remedies to customers who are exposed to indemnified liabilities. Any of these situations could have a material adverse effect on our business results.

15

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If operations were disrupted at Axcelis' primary manufacturing facility it would have a negative impact on our business.

We have one primary manufacturing facility, located in Massachusetts. Its operations could be subject to disruption for a variety of
reasons, including, but not limited to natural disasters, work stoppages, operational facility constraints and terrorism. Such disruption could cause delays in shipments of products to our customers
and could result in cancellation of orders or loss of customers, which could seriously harm our business.

Item 1B.    Unresolved Staff Comments.

None.

Item 2.    Properties.

We own one property and lease 49 properties, of which 14 are located in the United States and the remainder are located in Asia and
Europe, including offices in Taiwan, Singapore, South Korea, China, Malaysia, Italy, and Germany.

Our
principal facilities are listed below:

Facility Location

Principal Use

Square Footage
(Owned Leased)Beverly, Massachusetts

Manufacturing, research and development, sales/marketing, customer support, advanced process development, product demonstration, customer-training center and corporate headquarters.

417,000
(owned)Rockville, Maryland

Research and development, marketing and customer support.

22,000
(leased)


Although
we are currently operating significantly below normal capacity as a result of the continuing downturn in the industry, we believe that there is no material
long-term, excess capacity in our manufacturing facilities, although utilization is subject to change based on customer demand. We believe that our manufacturing facilities and equipment
generally are well maintained, in good operating condition, suitable for our purposes, and adequate for our present operations. Our Beverly, Massachusetts facility is ISO 9001 and
ISO 14001 certified and all other locations are ISO 9001 certified.

Item 3.    Legal Proceedings.

The Company is not presently a party to any litigation that it believes might have a material adverse effect on its business
operations. The Company is, from time to time, a party to litigation that arises in the normal course of its business operations.

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

None.

16

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock trades on the Nasdaq Global Select Market under the symbol ACLS. The following table sets forth the high and low sale
prices as reported on the Nasdaq Global Select Market during each of the quarters for the two most recent years. As of March 14, 2011, we had approximately 5,200 stockholders of record. We have
not paid any cash dividends in the past five years and do not anticipate paying cash dividends in the future.

Common Stock PriceHigh

Low2009First Quarter

$
0.70

$
0.17Second Quarter

$
0.66

$
0.32Third Quarter

$
1.29

$
0.32Fourth Quarter

$
1.78

$
0.752010First Quarter

$
1.86

$
1.41Second Quarter

$
2.58

$
1.44Third Quarter

$
1.96

$
1.34Fourth Quarter

$
3.72

$
1.80


17

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Item 6.    Selected Financial Data.

The following selected consolidated statements of operations data for each of the three years ended December 31, 2010, 2009, and
2008 and the consolidated balance sheet data as of December 31, 2010 and 2009 have been derived from the audited consolidated financial statements contained in Item 15 of Part IV
of this Form 10-K. The selected consolidated balance sheet data as of December 31, 2008 and 2007, and the statement of operations data for the years ended December 31,
2007 and 2006, has been derived from the audited financial statements contained in our Form 10-K filed on March 31, 2009. The consolidated balance sheet data as of
December 31, 2006 has been derived from the audited financial statements contained in our Form 10-K filed on March 15, 2007.

The
historical financial information set forth below may not be indicative of our future performance and should be read together with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our historical consolidated financial statements and notes to those statements included in Item 7 of Part II and Item 15 of
Part IV, respectively, of this Form 10-K.

Years ended December 31,2010

2009

2008

2007

2006(In thousands, except per share amounts)Consolidated statements of operations data:Revenue

$
275,212

$
133,022

$
250,214

$
404,800

$
461,717Gross profit


85,838


28,064


62,615


152,861


191,514Equity income (loss) of SEN





(3,238
)

(3,667
)

10,416


19,266Income (loss) before Income taxes


(17,261
)

(76,603
)

(195,803
)

(11,808
)

42,783Net income (loss)


(17,573
)

(77,468
)

(196,664
)

(11,398
)

40,770Net income (loss) per share:Basic

$
(0.17
)
$
(0.75
)
$
(1.91
)
$
(0.11
)
$
0.40Diluted

$
(0.17
)
$
(0.75
)
$
(1.91
)
$
(0.11
)
$
0.40Shares used in computing basic and diluted per share amounts:Basic


104,522


103,586


102,739


101,891


101,058Diluted


104,522


103,586


102,739


101,891


101,361Consolidated balance sheet data:Cash and cash equivalents

$
45,743

$
45,020

$
37,694

$
83,877

$
140,451Working capital


160,501


163,849


111,182


284,679


284,910Total assets


280,872


250,603


455,181


669,929


753,993Long-term liabilities


7,176


4,447


5,808


89,920


86,290Stockholders' equity


205,567


216,399


319,377


486,006


447,562


18

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements in "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking
statements that involve risks and uncertainties. Words such as may, will, should, would, anticipates, expects, intends, plans, believes, seeks, estimates and similar expressions identify such
forward-looking statements. The forward-looking statements contained herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ
materially from those expressed in such forward-looking statements. Factors that might cause such a difference include, among other things, those set forth under "Liquidity and Capital Resources" and
"Risk Factors" and others discussed elsewhere in this Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking
statements, except as may be required by law.

Overview

The semiconductor capital equipment industry is subject to significant cyclical swings in capital spending by semiconductor
manufacturers. Capital spending is influenced by demand for semiconductors and the products using them, the utilization rate and capacity of existing semiconductor manufacturing facilities and changes
in semiconductor technology, all of which are outside of our control. As a result, our revenue and gross margins fluctuate from year to year and
period to period. We typically become more efficient in manufacturing products as they mature. Our expense base is largely fixed and does not vary significantly with changes in volume. Therefore, we
experience fluctuations in operating results and cash flows depending on our revenue as driven by the level of capital expenditures by semiconductor manufacturers.

The
sizable expense of building, upgrading or expanding a semiconductor fabrication facility is increasingly causing semiconductor companies to contract with foundries to manufacture
their semiconductors. In addition, consolidation and partnering within the semiconductor manufacturing industry is increasing. We expect these trends to continue to reduce the number of our potential
customers. This growing concentration of Axcelis' customers may increase pricing pressure as higher percentages of our total revenue are tied to the buying decisions of a particular customer or a
small number of customers. Axcelis' net revenue from its ten largest customers accounted for 62.7% of total revenue for the year ended December 31, 2010 compared to, 56.6%, and 51.5% of revenue
for the years ended December 31, 2009 and 2008, respectively.

During
the last six months of 2007 and through 2009 challenging market conditions severely limited our ability to increase sales and market share. During this period, adverse market
conditions such as credit constriction, higher unemployment, lower corporate earnings, lower business investment and lower consumer spending severely impacted many technology manufacturers and
significantly lowered the demand for our products. During 2010, the market for our products steadily improved. We also estimate that we are gaining market share with our single wafer ion implant
systems for high current and high energy applications (the Optima HDx and Optima XEx), as customers are showing a higher acceptance of our technology. Our expense base is reduced from earlier periods
due to cost reduction initiatives implemented in 2009, 2008 and 2007.

Axcelis'
liquidity is affected by many factors. Some of these factors are based on normal operations of the business and others relate to the uncertainties of global economies, including
the availability of credit, and the state of the semiconductor equipment industry. Although our cash requirements fluctuate based on the timing and extent of these factors, based on our current
market, revenue and expense forecast we believe that our existing cash and cash equivalents will be sufficient to satisfy our anticipated cash requirements in the short-term.

19

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Operating
results for the years presented are not necessarily indicative of the results that may be expected for future interim periods or years as a whole.

Critical Accounting Estimates

Management's discussion and analysis of our financial condition and results of operations are based upon Axcelis' consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to
make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going
basis, we evaluate our estimates, including those related to revenue recognition, income taxes, accounts receivable, inventory and warranty obligations. Management's estimates are based on historical
experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We
believe the following accounting policies are critical in the portrayal of our financial condition and results of operations and require management's most significant judgments and
estimates in the preparation of our consolidated financial statements.

Revenue Recognition

Our revenue recognition policy involves significant judgment by management. As described below, we consider a broad array of facts and
circumstances in determining when to recognize revenue, including contractual future service obligations to the customer, the complexity of the customer's post delivery acceptance provisions, payment
history, customer creditworthiness and the installation process. In the future, if the post delivery acceptance provisions and installation process become more complex or result in a materially lower
rate of acceptance, we may have to revise our revenue recognition policy, which could delay the timing of revenue recognition.

Axcelis'
system sales transactions are made up of multiple elements, including the system itself and elements that are not delivered simultaneously with the system. These undelivered
elements might include a combination of installation services, extended warranty and support and spare parts, all of which are covered by a single sales price. The Company allocates revenue among the
elements using the residual method, in which estimated fair market value is established for all elements other than the system itself and the remainder of the sales price is allocated to the system.

The
value of the undelivered elements includes (a) the greater of (i) the fair value of the installation or (ii) the portion of the sales price that will not be
received until the installation is completed (the
"retention") plus (b) the fair value of all other undelivered elements. The amount allocated to installation is based upon the fair value of the service performed, including labor, which is
based upon the estimated time to complete the installation at hourly rates, and material components. The fair value of all other undelivered elements is based upon the price charged when these
elements are sold separately. Product revenue for products which have demonstrated market acceptance (legacy products), is generally recognized upon shipment provided title and risk of loss has passed
to the customer, evidence of an arrangement exists, prices are contractually fixed or determinable, collection is reasonably assured through historical collection results and regular credit
evaluations, and there are no uncertainties regarding customer acceptance. Revenue from installation services is recognized at the time formal acceptance is received from the customer or, for certain
customers, when both the formal acceptance and retention payment have been received. Revenue for other elements is recognized at the time products are shipped or the related services are performed.

20

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We
generally recognize systems revenue for products which have demonstrated market acceptance (legacy products) at the time of shipment because the customer's post-delivery
acceptance provisions and installation process have been established to be routine, commercially inconsequential and perfunctory. While some customers accept Axcelis' standard specifications, the
majority of Axcelis' systems are designed and tailored to meet the customer's specifications, as outlined in the contract between the customer and Axcelis. To ensure that the customer's specifications
are satisfied, many customers request that new systems be tested at Axcelis' facilities prior to shipment, normally with the customer present, under conditions that substantially replicate the
customer's production environment and the customer's criteria are confirmed to have been met. Customers of mature products generally do not require pre-shipment testing. We believe the
risk of failure to complete a system installation is remote. Should an installation not be completed successfully, the contractual provisions do not provide for forfeiture, refund or other purchase
price concession beyond those prescribed by the provisions of the Uniform Commercial Code applicable generally to such transactions.

For
initial shipments of systems with new technologies or in the small number of instances where Axcelis is unsure of meeting the customer's specifications or obtaining customer
acceptance upon shipment of the system, Axcelis will defer the recognition of systems revenue and related costs until written customer acceptance of the system is obtained. This deferral period is
generally within twelve months of shipment.

Revenue
related to maintenance and service contracts is recognized ratably over the duration of the contracts, or based on parts usage, where appropriate. Revenue related to service
hours is recognized when the services are performed.

Royalty
revenue was primarily earned under the terms of our license agreement with SEN. Royalty revenue was recorded at the time SEN notified the Company that royalties had been earned.

Impairment of Intangibles and Long-Lived Assets

We record impairment losses on intangibles and long-lived assets when events and circumstances indicate that these assets
might not be recoverable. Recoverability is measured by a comparison of the assets' carrying amount to their expected future undiscounted net cash flows. If such assets are considered to be impaired,
the impairment is measured based on the amount by which the carrying value exceeds its fair value. See Notes 2,6,7,8, and 9 to our Consolidated Financial Statements contained in Item 15
of this Annual Report on Form 10-K for further information regarding impairment of intangibles and long-lived assets.

Future
actual performance could be materially different from our current forecasts, which could impact future estimates of undiscounted cash flows and may result in the impairment of the
carrying amount of the long-lived assets in the future. This could be caused by strategic decisions made in response to economic and competitive conditions, the impact of the economic
environment on our customer base, or a material adverse change in our relationships with significant customers. Accordingly, we will perform an impairment analysis in the future when circumstances or
events warrant.

Accounts ReceivableAllowance for Doubtful Accounts

We record an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required
payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be necessary.

21

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InventoryAllowance for Excess and Obsolescence

We record an allowance for estimated excess and obsolete inventory. The allowance is determined using management's assumptions of
materials usage, based on estimates of forecasted and historical demand and market conditions. If actual market conditions become less favorable than those projected by management, additional
inventory write-downs may be required.

Although
we make every effort to ensure the accuracy of our forecasts or product demand and pricing assumptions, any significant unanticipated changes in demand, pricing, or technical
developments would significantly impact the value of our inventory and our reported operating results. In the future, if we find that estimates are too optimistic and determine that inventory needs to
be written down, the Company will recognize such costs in our cost of revenue at the time of such determination. Conversely, if we find our estimates are too pessimistic and we subsequently sell
product that has previously been written down, our gross margin in that period will be favorably impacted.

Product Warranty

We offer a one to three year product warranty, the terms and conditions of which vary depending upon the product sold. For all systems
sold, we accrue a liability for the estimated cost of standard warranty at the time of system shipment and defer the portion of systems revenue attributable to the fair value of
non-standard warranty. Costs for non-standard warranty are expensed as incurred. Factors that affect our warranty liability include the number of installed units, historical
and anticipated product failure rates, material usage and service labor costs. We periodically assess the adequacy of our recorded liability and adjust the amount as necessary.

22

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Results of Operations

The following table sets forth our results of operations as a percentage of total revenue for the periods indicated:

Years Ended December 31,2010

2009

2008Revenue:Product


88.2
%

74.2
%

77.6
%Service


11.8


25.5


20.7Royalties, primarily from SEN





0.3


1.7Total revenue


100.0


100.0


100.0Cost of revenue:Product


61.1


63.3


64.5Services


7.7


15.6


10.5Total cost of revenue


68.8


78.9


75.0Gross profit


31.2


21.1


25.0Operating expenses:Research and development


14.4


24.6


25.3Sales and marketing


10.0


19.0


17.8General and administrative


11.7


25.6


17.2Impairment of goodwill








16.8Impairment of intangibles and long lived assets








18.8Amortization of intangible assets








1.1Restructuring charges





4.2


2.7Total operating expenses


36.1


73.4


99.7Loss from operations:


(4.9
)

(52.3
)

(74.7
)Other income (expense):Gain on sale of SEN





0.8


Equity loss of SEN





(2.4
)

(1.5
)Interest income





0.1


0.6Interest expense





(1.3
)

(2.6
)Other, net


(1.5
)

(2.6
)

(0.1
)Total other income (expense)


(1.5
)

(5.4
)

(3.6
)Loss before income taxes


(6.4
)

(57.7
)

(78.3
)Provision for income taxes





0.7


0.3Net loss


(6.4
)%

(58.4
)%

(78.6
)%


Year ended December 31, 2010 in comparison to the year ended December 31, 2009

Revenue

Revenue increased significantly in 2010 compared to 2009 as the Company benefited from improving market conditions and increased
capacity utilization at customers' manufacturing facilities. The Company expects this positive trend to continue into 2011.

Product

Product revenue, which includes systems sales, sales of spare parts and product upgrades, was $242.8 million or 88.2% of revenue
in 2010, compared with $98.7 million, or 74.2% of revenue in 2009.

23

---



The
increase in product revenue in 2010 is attributable to the strengthening of the semiconductor market and a related increase in capital spending by semiconductor manufacturers. In addition, we also
believe we are gaining market share with our single wafer ion implant systems for high current and high energy applications (the Optima HDx and Optima XEx), as customers are showing a higher
acceptance of our technology.

Approximately
12.8% of systems revenue in 2010 was from sales of 200mm products and 87.2% was from sales of 300mm products, compared with 25.0% and 75.0% for sales of 200mm products and
300mm products in 2009, respectively.

A
portion of our revenue from system sales is deferred until installation and other services related to future deliverables are performed. The total amount of deferred revenue at
December 31, 2010 and 2009 was $16.3 million and $5.7 million, respectively. The increase was mainly due to the increase in systems sales in 2010.

Service

Service revenue, which includes the labor component of maintenance and service contracts and fees for service hours provided by
on-site service personnel, was $32.4 million, or 11.8% of revenue for 2010, compared with $33.9 million, or 25.5% of revenue, for 2009. Although service revenue should
increase with the expansion of the installed base of systems, it can fluctuate from period to period based on capacity utilization at customers' manufacturing facilities, which affects the need for
equipment service. The slight decrease during 2010 was primarily due to a decrease in fabrication utilization in the North American semiconductor industry.

Royalties

Royalties were previously earned under our prior license agreement with SEN. As a result of the sale of our investment in SEN, SEN has
had no further royalty obligations since March 30, 2009. Royalty revenue was $0.4 million or 0.3% of revenue for 2009.

As
an alternative to the line item revenue categories discussed above, management also uses revenue categorizations which look at revenue by product line (the most significant of which
is ion implant) and by aftermarket, as described below.

Ion Implant

Included in total revenue of $275.2 million in 2010 is revenue from sales of ion implantation products and service of
$232.4 million, or 84.4% of total revenue, compared with $110.9 million, or 83.4%, of total revenue in 2009. The dollar increase was due to the factors discussed above for product
revenue. Annual revenue from the sale of ion implantation products and service typically averages from 70% to 80% of total revenue.

Aftermarket

The Company's product revenue includes sales of spare parts and product upgrades as well as complete systems. We refer to the business
of selling spare parts and product upgrades, combined with the sale of maintenance labor and service contracts and service hours, as the "aftermarket" business. Included in total revenue of
$275.2 million in 2010 is revenue from our aftermarket business of $142.2 million, compared to $98.2 million for 2009. Aftermarket revenue generally increases with expansion of
the installed base of systems but can fluctuate from period to period based on capacity utilization at customers' manufacturing facilities which affects the sale of spare parts and demand for
equipment service.

24

---



Gross Profit

Product

Gross profit from product revenue was 30.8% for the twelve months ended December 31, 2010, compared to 14.7% for the twelve
months ended December 31, 2009. Approximately 3.3% of the 16.1% increase resulted from a lower provision for excess inventory. The remaining 12.8% increase in gross profit from product revenue
is attributable to higher systems sales volume and the related favorable absorption of fixed overhead costs which increased gross margins by 22.3%, offset by a 9.5% decrease in gross margin resulting
from an unfavorable mix of parts and upgrade revenue.

Service

Gross profit from service revenue was 34.3% for the twelve months ended December 31, 2010, compared to 38.8% for the twelve
months ended December 31, 2009. The decrease in gross profit is attributable to lower volumes.

Research and Development

Research and development expense was $39.5 million in 2010, an increase of $6.8 million, or 20.8%, compared with
$32.7 million in 2009. The increase was primarily payroll costs due to increased headcount ($3.1 million), increased professional fee expenses ($2.4 million), increased project
material costs ($1.3 million), and increased asset amortization and depreciation costs for assets used as demonstration and/or test systems ($0.1 million).

Research
and development expense was attributable to the following activities for 2010: 53% for new product development, 31% for improvement of existing products, and 16% for product
testing.

Sales and Marketing

Sales and marketing expense was $27.5 million in 2010, an increase of $2.3 million, or 9.1%, compared with
$25.2 million in 2009 as the Company benefited from improved market conditions in 2010. The increase was driven primarily by increased travel costs ($0.8 million), increased freight
costs ($0.8 million), increased supplies and marketing costs ($0.4 million), and increased payroll costs ($0.3 million).

General and Administrative

General and administrative expense was $32.1 million in 2010, a decrease of $2.0 million, or 5.9% compared with
$34.1 million in 2009. The decrease was driven primarily by decreased professional fee expenses ($4.6 million) primarily due to legal transaction costs and business outsourcing
activities being incurred in 2009 and a decrease in other miscellaneous costs ($0.4 million), offset by increased payroll and incentive compensation costs ($3.0 million).

Other Income (Expense)

Equity loss attributable to SEN was $3.2 million for the year ended December 31, 2009. As a result of the sale of the
Company's investment in SEN, subsequent to March 30, 2009, the Company no longer records equity income or loss from SEN.

Interest
income of $0.1 million for the year ended December 31, 2010, primarily relates to interest earned on cash and cash equivalents. Interest income decreased by
$0.1 million from the year ended December 31, 2009, primarily due to lower average cash balances and lower interest rates.

25

---



We
had no interest expense for the year ended December 31, 2010. Our interest expense was $1.7 million for the year ended December 31, 2009. We have had no
borrowings since we paid in full our convertible senior subordinated notes on March 30, 2009.

For
the year ended December 31, 2010 and 2009 the Company incurred $1.9 million of foreign exchange losses. Included in foreign exchange losses in 2010 are
$.3 million of foreign exchange losses relating to currency hedging activities. The primary reason for foreign exchange losses in both years was due to the weakening of the U.S dollar.

Income Taxes

We incur income tax expense relating principally to operating results of foreign entities in jurisdictions, principally in Asia, where
we earn taxable income. We have significant net operating loss carryforwards in the United States and certain foreign jurisdictions, principally Europe, and, as a result, we do not currently pay
significant income taxes in those jurisdictions and we do not recognize the tax benefit for such losses as discussed in Note 18 to the consolidated financial statements. Accordingly, our
effective income tax rate is not meaningful.

In
2010, the Company performed an evaluation of the deferred tax assets of certain of our foreign subsidiaries for which the Company had previously established a valuation allowance.
Based on the subsidiaries recent and expected ability to generate taxable income, the Company reduced the subsidiary's corresponding valuation allowance and recognized a tax benefit of
$1.3 million.

Year ended December 31, 2009 in comparison to the year ended December 31, 2008

Revenue

Revenue declined significantly in 2009 compared to 2008 due to the continuing depressed semiconductor equipment market.

Product

Product revenue, which includes systems sales, sales of spare parts and product upgrades, was $98.7 million or 74.2% of revenue
in 2009, compared with $194.3 million, or 77.6% of revenue in 2008. The decline in product revenue in 2008 and 2009 was attributable to a weakening semiconductor market and a related decrease
in capital spending by semiconductor manufacturers. In addition, a decrease in 200mm manufacturing capacity (a portion of which relates to the overall decline in the semiconductor capital equipment
market) decreased revenue from system sales by $95.6 million for 2009.

Approximately
25.0% of systems revenue in 2009 was from sales of 200mm products and 75.0% was from sales of 300mm products, compared with 41.0% and 59.0% for sales of 200mm products and
300mm products in 2008, respectively.

A
portion of our revenue from system sales is deferred until installation and other services related to future deliverables are performed. The total amount of deferred revenue at
December 31, 2009 and 2008 was $5.7 million and $14.4 million, respectively. The decline was mainly due to the decrease in overall systems revenue in 2009.

Service

Service revenue, which includes the labor component of maintenance and service contracts and fees for service hours provided by
on-site service personnel, was $33.9 million, or 25.5% of revenue for 2009, compared with $51.9 million, or 20.7% of revenue, for 2008. The decline was due to a continuing
decline in overall market conditions and low capacity utilization at customers' manufacturing facilities.

26

---



Royalties

Royalty revenue was $0.4 million or 0.3% of revenue for 2009, compared with $4.1 million, or 1.7% of revenue for 2008.
Royalties were earned primarily under our prior license agreement with SEN. As a result of the sale of our investment in SEN, SEN has had no further obligation to pay royalties to us since
March 30, 2009.

As
an alternative to the line item revenue categories discussed above, management also uses revenue categorizations which look at revenue by product line (the most significant of which
is ion implant) and by aftermarket, as described below.

Ion Implant

Included in total revenue of $133.0 million in 2009 was revenue from sales of ion implantation products and service of
$110.9 million, or 83.4% of total revenue, compared with $204.9 million, or 81.9%, of total revenue in 2008. The decline was due to the factors discussed above. Annual revenue from the
sale of ion implantation products and service typically averages from 70% to 80% of total revenue.

Aftermarket

Included in total revenue of $133.0 million in 2009 was revenue from our aftermarket business of $98.2 million, compared
to $143.0 million for 2008. After hitting bottom in the first quarter of 2009, industry utilization increased each subsequent quarter for the remainder of the year. This resulted in successive
improvements in aftermarket revenue each quarter.

Gross Profit

Product

Gross profit from product revenue was 14.7% for the twelve months ended December 31, 2009, compared to 17.0% for the twelve
months ended December 31, 2008. The decrease resulted from significantly lower systems sales volume during the twelve months ended December 31, 2009, and the related under absorption of
manufacturing overhead which reduced gross margins by 30.7%. This was offset by a 12.2% increase in gross margin resulting from the favorable impact of an increased mix of parts and upgrade revenue at
higher margins and 16.2% attributable to a lower provision for excess inventory.

Service

Gross profit from service revenue was 38.8% for the twelve months ended December 31, 2009, compared to 49.2% for the twelve
months ended December 31, 2008. The decrease in gross profit was attributable to significantly lower revenue.

Operating Expenses

In response to continuing weak market conditions in 2009 the Company took several actions, including reduction in headcount, to reduce
operating expenses. The aggregate of research and development, sales and marketing, and general and administrative expense reduction in 2009 compared to 2008 was $58.9 million.

Research and Development

Research and development expense was $32.7 million in 2009, a decrease of $30.6 million, or 48.3%, compared with
$63.3 million in 2008. The decrease was primarily due to substantial completion

27

---



of
Optima and Integra platform development in 2008, which resulted in decreased payroll costs ($12.4 million), decreased professional fee expenses ($3.2 million), decreased project
material costs ($3.9 million), decreased development asset amortization and depreciation costs for assets used as demonstration and/or test systems ($8.9 million) and decreased other
miscellaneous expenses ($2.2 million).

Research
and development expense was attributable to the following activities for 2009: 49% for new product development, 35% for improvement of existing products, and 16% for product
testing.

Sales and Marketing

Sales and marketing expense was $25.2 million in 2009, a decrease of $19.4 million, or 43.5%, compared with
$44.6 million in 2008. The decrease was driven primarily by decreased payroll costs ($9.5 million), decreased professional services ($4.0 million), decreased supplies and
marketing costs ($1.7 million), decreased travel costs ($2.3 million), decreased freight costs ($1.1 million) and decreased other miscellaneous costs ($0.8 million).

General and Administrative

General and administrative expense was $34.1 million in 2009, a decrease of $9.0 million, or 20.8% compared with
$43.1 million in 2008. The decrease was driven primarily by decreased payroll costs of ($4.5 million), decreased professional fee expenses ($2.2 million) decreased amortization
costs ($1.1 million), and a decrease in other miscellaneous costs ($1.2 million).

Impairment of Intangibles and Long-Lived Assets

The significant decline in our stock price experienced at the end of the third quarter of 2008 continued through the end of the fourth
quarter and beyond, resulting in a sustained market capitalization well below book value.

During
2009 we continued to experience events and circumstances which indicated that a further impairment of long-lived assets may have occurred. The significant decline in
our stock price continued through 2009, and we continued to maintain a market capitalization significantly below book value. However, the estimated future total market for our products, which was
significantly revised downward in the fourth quarter of 2008, showed signs of modest recovery while still less than historical levels.

Accordingly,
as of December 31, 2009, we performed an analysis comparing undiscounted cash flows estimated to be generated by the long-lived assets to the carrying
amounts of those assets. The estimates of future operating results and cash flows were derived from our updated long-term financial forecast, which represented the best estimate that we
had at the time. This forecast relied primarily on market assumptions and market share we expected to achieve. As of December 31, 2009, our analysis indicated that the carrying amounts for
long-lived assets were expected to be recovered. As such we did not record an impairment charge for the year ended December 31, 2009. As a result of our review of the recoverability
of intangibles and long-lived assets, at December 31, 2008, we recorded an impairment charge of $46.9 million consisting of the entire net book value of intangible assets of
$8.3 million, certain other assets of $21.1 million, and property, plant and equipment of $17.5 million.

Restructuring

During the year ended December 31, 2009, we implemented a reduction in force to further reduce costs to mitigate deteriorating
industry fundamentals. This reduction in force resulted in a total charge to expense of approximately $6.1 million related to separation and outplacement costs for the year ended
December 31, 2009, offset by a reversal of $0.6 million of accrued compensation expense related to terminated employees. A charge to expense of $5.5 million was recorded in the
year ended December 31, 2009. See Note 10 to our Consolidated Financial Statements contained in Item 15 of this Annual Report on Form 10-K for further
information regarding our 2009 restructuring.

28

---





Changes in our restructuring liability during 2009, included in amounts reported as other current liabilities, are as follows:

Severance(in thousands)Balance at December 31, 2008

$
746Severance and related costs


6,084Cash payments


(6,533
)Balance at December 31, 2009

$
297


Other Income (Expense)

Equity loss attributable to SEN was $3.2 million for the year ended December 31, 2009. This was compared to equity loss
attributable to SEN of $3.7 million for the year ended December 31, 2008. As a result of the sale of our investment in SEN, subsequent to March 30, 2009, the Company no longer has
recorded equity income or loss from SEN.

Interest
income of $0.2 million for the year ended December 31, 2009, primarily related to interest earned on cash and cash equivalents. Interest income decreased by
$1.4 million from the year ended December 31, 2008, due primarily to lower average cash balances.

Interest
expense decreased by $5.1 million for the year ended December 31, 2009 compared to the year ended December 31, 2008. The decrease was due to the payment in
full of the convertible senior subordinated notes on March 30, 2009.

Income Taxes

We incur income tax expense relating principally to operating results of foreign entities in jurisdictions, principally in Asia, where
we earn taxable income. During 2009 we had
significant net operating loss carryforwards in the United States and certain foreign jurisdictions, principally Europe, and, as a result, we did not currently pay significant income taxes in those
jurisdictions and we did not recognize the tax benefit for such losses as discussed in Note 18 to the consolidated financial statements. Accordingly, our effective income tax rate was not
meaningful.

Liquidity and Capital Resources

Capital expenditures were $1.4 million and $0.5 million for the years ended December 31, 2010 and 2009,
respectively. We have no significant capital projects planned for 2011 and total capital expenditures for 2011 are projected to be less than $3.5 million. Future capital expenditures beyond
2011 will depend on a number of factors, including the timing and rate of expansion of our business and our ability to generate cash to fund them.

We
have outstanding standby letters of credit, bank guarantees and surety bonds in the amount of $8.9 million to support certain operating lease obligations, workers' compensation
insurance, and certain value added tax claims in Europe, of which $107,000 at December 31, 2010 was supported by cash pledged as collateral. The pledged cash is reflected as
long-term restricted cash on the consolidated balance sheet.

29

---



The
following represents our commercial commitments as of December 31, 2010 (in thousands):

Amount of Commitment Expiration by PeriodOther Commercial Commitments

Total

2011

2012-2013

2014-2015

ThereafterSurety bonds

$
7,192

$
2,742

$
4,450

$


$
Standby letters of credit


1,575


1,575








Statutory liability deposits


107





107





$
8,874

$
4,317

$
4,557

$


$



The
following represents our contractual obligations as of December 31, 2010 (in thousands):

Payments Due by PeriodContractual Obligations

Total

2011

2012-2013

2014-2015

ThereafterPurchase order commitments

$
59,008

$
59,008

$


$


$
Operating leases


9,638


2,955


3,399


2,337


947$
68,646

$
61,963

$
3,399

$
2,337

$
947


We
have no off-balance sheet arrangements at December 31, 2010.

Our
liquidity is affected by many factors. Some of these relate specifically to the operations of our business, for example, the rate of sale of our Optima and Integra products, and
others relate to the uncertainties of global economies, including the availability of credit, and the condition of the overall semiconductor equipment industry.

We
have net operating loss and tax credit carryforwards the tax effect of which aggregate $104.3 million at December 31, 2010. These carryforwards, which expire principally
between 2021 and 2030, are available to reduce future income tax liabilities in the United States and certain foreign jurisdictions.

In
2010, $5.9 million of cash was used to support operating activities which was $28 million less than in 2009. Cash used for operations in 2010 was predominately driven by
the Company's net loss from operations offset by noncash charges for depreciation and amortization and stock based compensation expense. Cash and cash equivalents at December 31,
2010 were $45.7 million, compared to $45.0 million at December 31, 2009. Our 2011 plan includes improvement in revenue, operating profit and cash flow.

On
March 12, 2010, we amended our existing revolving credit facility with a bank. The amended agreement provides for borrowings up to the lesser of $20 million or specified
percentages of the amounts of qualifying accounts receivable and inventory. The facility has certain financial covenants requiring us to maintain minimum levels of operating results and liquidity. On
May 25, 2010, the Company and its lender agreed to modify a financial covenant in the revolving credit facility regarding maximum allowable quarterly losses. Based on current forecasts we
believe we will be in compliance with the financial covenants throughout the remaining term of the facility. Borrowings made under the facility will bear interest at the greater of 6% or the bank's
prime rate plus 2%. At no time during the term of the agreement has the Company borrowed against the facility and $18.4 million was available for borrowing as of December 31, 2010. The
agreement will terminate on March 11, 2011. The Company is currently in negotiations with several banks for a new revolving credit facility on more favorable terms than our current credit
facility. The Company expects the new credit facility to be in place during the second quarter of 2011. The Company has requested and has been granted a 30 day extension to its existing credit
facility until April 10, 2011.

We
believe that based on our current market, revenue and expense forecasts, our existing cash and cash equivalents will be sufficient to satisfy our anticipated cash requirements in the
short-term. Our

30

---



2011
forecast reflects revenue and gross margins consistent with our understanding of customer plans, the market conditions currently forecasted by the industry, and capacity utilization at customers'
manufacturing facilities. Forecasted operating expense levels for 2011 reflect those in effect at the end of 2010 adjusted for a moderate increase in research and development expense and a return to
market based employee compensation.

Recent Accounting Pronouncements

In September 2009, the FASB issued a new accounting standard to provide guidance on revenue recognition criteria for multiple-element
arrangements. The new accounting standard modifies the criteria used to separate elements in a multiple-element arrangement by introducing the concept of best estimate of selling price, establishing a
hierarchy of evidence for determining selling price (fair value), requiring the use of relative selling price method and prohibiting the use of the residual method to allocate arrangement
consideration among units of accounting. The new accounting standard also expands the disclosure requirements for all multiple element arrangements and is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 (January 1, 2011 for a calendar year-end entity). The adoption of the new
accounting standard will not have a material impact on the Company's future operating results.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk.

Interest Rate Sensitivity

Axcelis' exposure to market risk for changes in interest rates relates primarily to our investment portfolio, which consists entirely
of cash-equivalents at December 31, 2010. The primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk.
This is accomplished by investing in marketable high investment grade securities and limiting exposure to any one issue or issuer. We do not use derivative financial instruments in managing our
investment portfolio and, due to the nature of our investments, we do not expect our operating results or cash flows to be affected to any significant degree by any change in market interest rates.

Foreign Currency Exchange Risk

Substantially all of our sales are billed in U.S. dollars, thereby reducing the impact of fluctuations in foreign exchange rates on our
results. Operating margins of certain foreign operations can fluctuate with changes in foreign exchange rates to the extent revenue are billed in U.S. dollars and operating expenses are incurred in
the local functional currency. During the years ended December 31, 2010 and 2009, approximately 24% and 37% of our revenue were derived from foreign operations with this inherent risk. In
addition, at both December 31, 2010 and 2009, our operations outside of the United States accounted for approximately 34% and 39% of our total assets, respectively, the majority of which was
denominated in currencies other than the U.S. dollar.

Item 8.    Financial Statements and Supplementary Data.

Response to this Item is submitted as a separate section of this report immediately following Item 15.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

31

---



Item 9A.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of
the period covered by this annual report (the "Evaluation Date"). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date,
these disclosure controls and procedures are effective.

32

---





Internal Control over Financial Reporting

Management's Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined
in Rule 13a-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. A control
system, no matter how well designed and operated, can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management
assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth
in the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control-Integrated Framework.

Based
on this assessment, management has concluded that, as of December 31, 2010, our internal control over financial reporting is effective based on those criteria.

The
independent registered public accounting firm of Ernst & Young LLP, as auditors of our consolidated financial statements, has issued an attestation report on its
assessment of our internal control over financial reporting.

33

---



Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders of Axcelis Technologies, Inc.

We
have audited Axcelis Technologies, Inc.'s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Axcelis Technologies, Inc.'s management is
responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management's Annual Report on Internal Control over financial reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, Axcelis Technologies, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the
COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Axcelis
Technologies, Inc. as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2010 of Axcelis Technologies, Inc. and our report dated March 14, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP


Boston,
Massachusetts
March 14, 2011

34

---



Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act) identified in connection with the evaluation of our internal control that occurred during our fourth quarter that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.

Item 9B.    Other Information.

None.

PART III

Item 10.    Directors, Executive Officers and Corporate Governance.

A portion of the information required by Item 10 of Form 10-K is incorporated by reference from the
information responsive thereto contained in the sections in Axcelis Proxy Statement for the Annual Meeting of Stockholders to be held April 26, 2011 (the "Proxy Statement")
captioned:



The
remainder of such information is set forth under the heading "Executive Officers of the Registrant" at the end of Item 1 in Part I of this report.

Item 11.    Executive Compensation.

The information required by Item 11 of Form 10-K is incorporated by reference from the information responsive
thereto contained in the sections in the Proxy Statement captioned:



Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

A portion of the information required by Item 12 of Form 10-K is incorporated by reference from the
information responsive thereto contained in the sections in the Proxy Statement captioned:



The
remainder of such information is set forth below:

Equity Plan Reserves Disclosure

We maintain two equity compensation plans, the 2000 Stock Plan and the Employee Stock Purchase Plan. The number of shares issuable upon
exercise of outstanding options and unvested restricted stock units granted to employees and non-employee directors, as well as the number of

35

---



shares
remaining available for future issuance, under our equity compensation plans as of December 31, 2010 are summarized in the following table:

(C)(A)



Number of
shares remaining
available for future
issuance under equity
compensation plans
(excluding shares reflected
in column (A)(2)Number of shares
to be issued upon
exercise of
outstanding options,
warrents and rights(1)

(B)Plan category

Weighted-average
exercise price of
outstanding options,
warrants and rightsEquity compensation plans approved by stockholders


19,176,031

$
3.70


12,634,359Equity compensation plans not approved by stockholders








Total


19,176,031

$
3.70


12,634,359


---

Item 13.    Certain Relationships and Related Transactions and Director Independence.

The information required by Item 13 of Form 10-K is incorporated by reference from the information responsive
thereto contained in the sections in the Proxy Statement captioned:



Item 14.    Principal Accounting Fees and Services

The information required by Item 14 of Form 10-K is incorporated by reference from the information responsive
thereto contained in the section captioned "Proposal 2: Ratification of the Appointment of our Independent Registered Public Accounting Firm" in the Proxy Statement.

36

---





PART IV

Item 15.    Exhibits, Financial Statement Schedules.



Report of Independent Registered Public Accounting Firm

F-1Consolidated Statements of OperationsFor the years ended December 31, 2010, 2009 and 2008

F-2Consolidated Balance SheetsDecember 31, 2010 and 2009

F-3Consolidated Statements of Stockholders' EquityFor the years ended December 31, 2010, 2009 and
2008

F-4Consolidated Statements of Cash FlowsFor the years ended December 31, 2010, 2009 and 2008

F-5Notes to Consolidated Financial Statements

F-6








37

---









Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders of Axcelis Technologies, Inc.

We
have audited the accompanying consolidated balance sheets of Axcelis Technologies, Inc. (the "Company") as of December 31, 2010 and 2009, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule
listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Axcelis Technologies, Inc. at
December 31, 2010 and 2009, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information
set forth therein.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Axcelis Technologies, Inc.'s internal control over
financial reporting as of December 31, 2010, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated March 14, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP


Boston,
Massachusetts
March 14, 2011

F-1

---







Axcelis Technologies, Inc.  Consolidated Statements of Operations  (In thousands, except per share amounts)

Year Ended December 31,2010

2009

2008RevenueProduct

$
242,771

$
98,716

$
194,275Service


32,441


33,917


51,880Royalties, primarily from SEN





389


4,059275,212


133,022


250,214Cost of revenueProduct


168,047


84,185


161,310Service


21,327


20,773


26,289189,374


104,958


187,599Gross profit


85,838


28,064


62,615Operating expensesResearch and development


39,524


32,661


63,262Sales and marketing


27,549


25,209


44,573General and administrative


32,132


34,087


43,056Impairment of goodwill








42,115Impairment of intangibles and long-lived assets








46,949Amortization of intangible assets








2,624Restructuring charges





5,541


6,87399,205


97,498


249,452Loss from operations


(13,367
)

(69,434
)

(186,837
)Other income (expense)Gain on sale of SEN





1,080


Equity loss of SEN





(3,238
)

(3,667
)Interest income


96


181


1,614Interest expense





(1,676
)

(6,744
)Other, net


(3,990
)

(3,516
)

(169
)(3,894
)

(7,169
)

(8,966
)Loss before income taxes


(17,261
)

(76,603
)

(195,803
)Income taxes


312


865


861Net loss

$
(17,573
)
$
(77,468
)
$
(196,664
)Net loss per shareBasic and diluted net loss per share

$
(0.17
)
$
(0.75
)
$
(1.91
)Shares used in computing basic and diluted net loss per shareWeighted average common shares outstanding


104,522


103,586


102,739


See
accompanying Notes to these Consolidated Financial Statements

F-2

---







Axcelis Technologies, Inc.  Consolidated Balance Sheets  (In thousands, except per share amounts)

December 31,2010

2009ASSETSCurrent assetsCash and cash equivalents

$
45,743

$
45,020Restricted cash





4,918Accounts receivable, net


57,888


19,094Inventories, net


109,653


114,558Prepaid expenses and other current assets


15,346


10,016Total current assets


228,630


193,606Property, plant and equipment, net


38,594


40,868Long-term restricted cash


107


2,245Other assets


13,541


13,884$
280,872

$
250,603LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesAccounts payable

$
36,709

$
9,680Accrued compensation


10,597


9,267Warranty


2,556


638Income taxes





1,499Deferred revenue


13,859


5,127Other current liabilities


4,408


3,546Total current liabilities


68,129


29,757Long-term deferred revenue


2,417


563Other long-term liabilities


4,759


3,884Commitments and contingencies (Note 16)Stockholders' equityPreferred stock, $0.001 par value, 30,000 shares authorized; none issued or outstanding





Common stock, $0.001 par value, 300,000 shares authorized; 105,906 shares issued and 105,786 shares outstanding at December 31, 2010;
104,212 shares issued and 104,092 shares outstanding at December 31, 2009


106


104Additional paid-in capital


493,967


488,321Treasury stock, at cost, 120 shares at December 31, 2010 and 2009


(1,218
)

(1,218
)Accumulated deficit


(293,520
)

(275,947
)Accumulated other comprehensive income


6,232


5,139205,567


216,399$
280,872

$
250,603


See
accompanying Notes to these Consolidated Financial Statements

F-3

---







Axcelis Technologies, Inc.  Consolidated Statements of Stockholders' Equity  (In thousands)

Common Stock







Accumulated
Other
Comprehensive
Income (Loss)Additional
Paid-in Capital

Treasury
Stock

Accumulated
Deficit

Total
Stockholders'
EquityShares

AmountBalance at December 31, 2007


102,565

$
103

$
478,726

$
(1,218
)
$
(1,815
)
$
10,210

$
486,006Comprehensive lossNet loss














(196,664
)




(196,664
)Foreign currency translation adjustments

















25,075


25,075Change in pension

















140


140Total comprehensive loss




















(171,449
)Exercise of stock options


22





110











110Issuance of shares under Employee Stock Purchase Plan


388





786











786Forfeiture of restricted common shares


(12
)
















Issuance of restricted common shares


437





(785
)










(785
)Stock-based compensation expense








4,709











4,709Balance at December 31, 2008


103,400


103


483,546


(1,218
)

(198,479
)

35,425


319,377Comprehensive lossNet loss














(77,468
)




(77,468
)Foreign currency translation adjustments

















(30,239
)

(30,239
)Change in pension

















(47
)

(47
)Total comprehensive loss




















(107,754
)Exercise of stock options


66


1


44











45Issuance of shares under Employee Stock Purchase Plan


302





184











184Issuance of restricted common shares


444





(104
)










(104
)Stock-based compensation expense








4,651











4,651Balance at December 31, 2009


104,212


104


488,321


(1,218
)

(275,947
)

5,139


216,399Comprehensive lossNet loss














(17,573
)




(17,573
)Foreign currency translation adjustments

















1,535


1,535Change in pension

















(442
)

(442
)Total comprehensive loss




















(16,480
)Exercise of stock options


704


1


552











553Issuance of shares under Employee Stock Purchase Plan


280


1


637











638Issuance of restricted common shares


262





(201
)










(201
)Issuance of restricted shares in satisfaction of accrued compensation


448





570











570Stock-based compensation expense








4,088











4,088Balance at December 31, 2010


105,906

$
106

$
493,967

$
(1,218
)
$
(293,520
)
$
6,232

$
205,567


See accompanying Notes to these Consolidated Financial Statements

F-4

---







Axcelis Technologies, Inc.  Consolidated Statements of Cash Flow  (In thousands)

Year Ended December 31,2010

2009

2008Cash flows from operating activitiesNet loss

$
(17,573
)
$
(77,468
)
$
(196,664
)Adjustments to reconcile net loss to net cash used for operating activitiesUndistributed loss of SEN





3,238


3,667Depreciation and amortization


7,045


7,436


20,947Gain on sale of SEN





(1,080
)

Deferred income taxes


(1,525
)

(765
)

189Amortization of intangible assets








2,624Accretion of premium on convertible debt





133


3,287Stock-based compensation expense


4,088


4,651


4,709Impairment of goodwill








42,115Impairment of intangibles and long-lived assets








46,949Provision for excess inventory


2,015


9,818


24,631Cash dividend from SEN








2,016Changes in operating assets & liabilitiesAccounts receivable


(38,652
)

8,572


48,644Inventories


3,549


26,445


(6,942
)Prepaid expenses and other current assets


(3,469
)

8,131


14,991Accounts payable & other current liabilities


32,276


(11,038
)

(23,330
)Deferred revenue


10,601


(8,695
)

(26,151
)Income taxes


(1,406
)

1,154


(162
)Other assets and liabilities


(2,841
)

(4,474
)

(10,239
)Net cash used for operating activities


(5,892
)

(33,942
)

(48,719
)Cash flows from investing activitiesExpenditures for property, plant, and equipment


(1,403
)

(463
)

(3,407
)Decrease in restricted cash


7,056


1,491


9,624Proceeds from sale of SEN





132,847


Payments related to sale of SEN





(10,590
)

Net cash provided by investing activities


5,653


123,285


6,217Cash flows from financing activitiesRepayment of convertible debt





(83,344
)

Financing fees and other expenses


(523
)




Proceeds from exercise of stock options


553


45


110Proceeds from Employee Stock Purchase Plan


569


184


786Net cash provided by (used for) financing activities


599


(83,115
)

896Effect of exchange rate changes on cash


363


1,098


(4,577
)Net increase (decrease) in cash and cash equivalents


723


7,326


(46,183
)Cash and cash equivalents at beginning of period

$
45,020

$
37,694

$
83,877Cash and cash equivalents at end of period

$
45,743

$
45,020

$
37,694Cash paid for interest

$


$
3,009

$
3,188Cash paid for income taxes

$
2,286

$
734

$
1,064Non Cash investing and financing activities:Issuance of restricted common stock in satisfaction of accrued compensation

$
570

$


$



See
accompanying Notes to these Consolidated Financial Statements

F-5

---







Axcelis Technologies, Inc.  Notes to Consolidated Financial Statements

Note 1.  Nature of Business

Axcelis Technologies, Inc. ("Axcelis" or the "Company"), is a worldwide producer of ion implantation, dry strip and other processing equipment used in the
fabrication of semiconductor chips in the United States, Europe and Asia. In addition, the Company provides extensive aftermarket service and support, including spare parts, equipment upgrades, and
maintenance services to the semiconductor industry.

Until
March 30, 2009, the Company owned 50% of equity of a joint venture with Sumitomo Heavy Industries, Ltd. ("SHI") in Japan. This joint venture, which was known as SEN
licensed technology from the Company relating to the manufacture of specified ion implantation products and had exclusive rights to manufacture and sell these products in the territory of Japan. On
March 30, 2009, the Company sold to SHI all of the Company's common shares in SEN. in exchange for a cash payment of 13 billion Yen, which resulted in proceeds of approximately
$132.8 million before advisor fees and other expenses of $10.6 million. The sales price was determined through an arm's length negotiation. This transaction terminated all prior
agreements among the three parties relating to the SEN joint venture. In addition, the arbitration with SEN initiated by Axcelis in Tokyo was dismissed. Detailed information about the Company's
investment in SEN is provided in Note 19.

A
portion of the proceeds of the sale were used to pay off, in full, the amounts due to the holder of the Company's 4.25% Convertible Senior Subordinated Notes.

Note 2.  Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Axcelis and its wholly-owned, controlled subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Foreign Currency

The functional currency for substantially all operations outside the United States is the local currency. Financial statements for
these operations are translated into United States dollars at year-end rates as to assets and liabilities and average exchange rates during the year as to revenue and expenses. The
resulting translation adjustments are recorded in stockholders' equity as an element of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are included in
other income (expense) in the consolidated statements of operations.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of ninety days or less. Cash
equivalents consist primarily of money market securities, direct and indirect U.S. government obligations, commercial paper, and obligations of U.S. banks. Cash equivalents are carried on the balance
sheet at fair market value.

F-6

---



Inventories

Inventories are carried at lower of cost, determined using the first-in, first-out (FIFO) method, or market.
The Company periodically reviews its inventories and makes provisions as necessary for estimated obsolescence or damaged goods to ensure values approximate lower of cost or market. The amount of such
markdowns is equal to the difference between cost of inventory and the estimated market value based upon assumptions about future demands, selling prices, and market conditions.

Axcelis
records an allowance for estimated excess inventory. The allowance is determined using management's assumptions of materials usage, based on estimates of demand and market
conditions. If actual market conditions become less favorable than those projected by management, additional inventory write-downs may be required.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is computed using the straight-line method. The historical
cost of buildings is depreciated over forty years and machinery and equipment principally over three to ten years. Expenditures for maintenance and repairs are expensed as incurred. Expenditures for
renewals and betterments are capitalized.

Impairment of Intangibles and Long-Lived Assets

The Company records impairment losses on intangibles and long-lived assets when events and circumstances indicate that
these assets might not be recoverable. Recoverability is measured by a comparison of the assets' carrying amount to their expected future undiscounted net cash flows. If such assets are considered to
be impaired, the impairment is measured based on the amount by which the carrying value exceeds its fair value.

In
2008, the Company experienced a significant decline in its stock price resulting in a sustained market capitalization well below book value. In addition, the estimated future total
available market for the Company's products, as published by independent third party industry analysts, was significantly revised downward in the fourth quarter and the Company experienced a 26%
decline (as compared to aftermarket revenue in the third quarter of 2008) in its aftermarket business, reflecting significant declines in manufacturers' capacity utilization. This fourth quarter
contraction in the industry led the Company to revise its short-term and long-term financial forecast. As discussed in Note 6, 8 and 9 to the consolidated financial
statements for the year ended December 31, 2008, the Company recorded a total intangible and long-lived asset impairment charge of $46.9 million. This charge consisted of
writing off the net book value of all its intangibles of $8.3 million, certain other assets of $21.1 million and property, plant and equipment of $17.5 million. As a result of
economic conditions, along with its stock price below book value, the Company performed a test for recoverability of its remaining long-lived assets at December 31, 2009, concluding
that long-lived assets were not impaired. At December 31, 2010, based on the increased demand for our products and the increase in our share price the Company concluded that no
events or circumstances existed that indicated that our long-lived assets were not recoverable.

Future
actual performance could be materially different from our current forecasts, which could impact future estimates of undiscounted cash flows and may result in the impairment of the
carrying amount of the long-lived assets in the future. This could be caused by strategic decisions made in response to economic and competitive conditions, the impact of the economic
environment on our customer base, or a material adverse change in the Company's relationships with significant customers. Accordingly, the Company will perform an impairment analysis in the future
when circumstances or events warrant.

F-7

---



Concentration of Risk

Financial instruments, which potentially expose Axcelis to concentrations of credit risk, consist principally of accounts receivable
and cash equivalents. Axcelis' customers consist of semiconductor manufacturers located throughout the world. Axcelis' net sales to its ten largest customers accounted for 62.7%, 56.6%, and 51.5% of
revenue in 2010, 2009, and 2008, respectively.

Axcelis
performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral to secure accounts receivable. For selected overseas sales, Axcelis
requires customers to obtain letters of credit before product is shipped. Axcelis maintains an allowance for doubtful accounts based on its assessment of the collectability of accounts receivable. The
Company reviews the allowance for doubtful accounts monthly. The Company does not have any off-balance-sheet credit exposure related to its customers.

Axcelis'
exposure to market risk for changes in interest rates relates primarily to cash equivalents. The primary objective of the Company's investment activities is to preserve
principal while maximizing yields without significantly increasing risk. This is accomplished by investing in marketable high investment grade securities and limiting exposure to any one issue or
issuer. The Company does not use derivative financial instruments to manage its investment portfolio and does not expect operating results or cash flows to be affected to any significant degree by any
change in market interest rates.

Some
of the components and sub-assemblies included in the Company's products are obtained either from a sole source or a limited group of suppliers. Disruption to the
Company's supply source, resulting either from depressed economic conditions or other factors, could affect its ability to deliver products to its customers.

Accumulated Other Comprehensive Income

Comprehensive income is comprised of two components, net loss and other comprehensive income. Other comprehensive income consists of
foreign currency translation adjustments and the effects of the minimum pension liability. The following table shows the cumulative components of accumulated other comprehensive income for the years
ended December 31, 2010, 2009 and 2008:

2010

2009

2008(in thousands)Foreign currency translation adjustments

$
6,323

$
4,788

$
35,027Pension benefit adjustment


(91
)

351


398Total accumulated other comprehensive income

$
6,232

$
5,139

$
35,425


Fair Value of Financial Instruments

The carrying amounts of certain of the Company's financial instruments, including cash equivalents, accounts receivable, accounts
payable and other accrued liabilities approximate fair value due to their short maturities.

Revenue Recognition

The Company's revenue recognition policy involves significant judgment by management. As described below, the Company considers a broad
array of facts and circumstances in determining when to recognize revenue, including contractual obligations to the customer, the complexity of the customer's post delivery acceptance provisions,
payment history, customer creditworthiness and the installation process. In the future, if the post delivery acceptance provisions and installation process become more complex or result in a
materially lower rate of acceptance, the Company may have to revise its revenue recognition policy, which could delay the timing of revenue recognition.

F-8

---



Axcelis'
system sales transactions are made up of multiple elements, including the system itself and elements that are not delivered simultaneously with the system. These undelivered
elements might include a combination of installation services, extended warranty and support and spare parts, all of which are covered by a single sales price. The Company allocates revenue among the
elements using the residual method, in which estimated fair market value is established for all elements other than the system itself and the remainder of the sales price is allocated to the system.

The
value of the undelivered elements includes (a) the greater of (i) the fair value of the installation or (ii) the portion of the sales price that will not be
received until the installation is completed (the "retention") plus (b) the fair value of all other undelivered elements. The amount allocated to installation is based upon the fair value of
the service performed, including labor, which is based upon the estimated time to complete the installation at hourly rates, and material components. The fair value of all other undelivered elements
is based upon the price charged when these elements are sold separately. Product revenue for products which have demonstrated market acceptance (legacy products), generally recognized upon shipment
provided title and risk of loss has passed to the customer, evidence of an arrangement exists, prices are contractually fixed or determinable, collectability is reasonably assured through historical
collection results and regular credit evaluations, and there are no uncertainties regarding customer acceptance. Revenue from installation services is recognized at the time formal acceptance is
received from the customer or, for certain customers, when both the formal acceptance and retention payment have been received. Revenue for other elements is recognized at the time products are
shipped or the related services are performed.

The
Company generally recognizes revenue for products which have demonstrated market acceptance (legacy products) at the time of shipment because the customer's post-delivery
acceptance provisions and installation process have been established to be routine, commercially inconsequential and perfunctory. The majority of Axcelis' systems are designed and tailored to meet the
customer's specifications, as outlined in the contract between the customer and Axcelis, which may be the Axcelis standard specification. To ensure that the customer's specifications are satisfied,
many customers request that new systems be tested at Axcelis' facilities prior to shipment, normally with the customer present, under conditions that substantially replicate the customer's production
environment and the customer's criteria are confirmed to have been met. Customers of mature products generally do not require pre-shipment testing. The Company believes the risk of failure
to complete a system installation is remote. Should an installation not be completed successfully, the contractual provisions do not provide for forfeiture, refund or other purchase price concession
beyond those prescribed by the provisions of the Uniform Commercial Code applicable generally to such transactions.

For
initial shipments of systems with new technologies or in the small number of instances where Axcelis is unsure of meeting the customer's specifications or obtaining customer
acceptance upon shipment of the system, Axcelis will defer the recognition of systems revenue and related costs until written customer acceptance of the system is obtained. This deferral period is
generally within twelve months of shipment.

Revenue
related to maintenance and service contracts is recognized ratably over the duration of the contracts, or based on parts usage, where appropriate. Revenue related to service
hours is recognized when the services are performed.

Product
revenue includes revenue from system sales, sales of spare parts, the spare parts component of maintenance and service contracts and product upgrades. Service revenue includes
the labor component of maintenance and service contract amounts charged for on-site service personnel.

Shipping and Handling Costs

Shipping and handling costs are included in cost of revenue.

F-9

---



Stock-Based Compensation

The Company recognizes compensation expense for all share-based payments to employees and directors, including grants of employee stock
options, based on the grant-date fair value of those share-based payments using the Black-Sholes option pricing model, adjusted for expected forfeitures. Stock-based compensation expense
is recognized ratably over the requisite service period.

See
Note 14 for additional information relating to stock-based compensation.

Income Taxes

The Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and operating loss
and tax credit carryforwards. The Company's consolidated financial statements contain certain deferred tax assets which have arisen primarily as a result of operating losses, as well as other
temporary differences between financial and tax accounting. The Company establishes a valuation allowance if the likelihood of realization of the deferred tax assets is reduced based on an evaluation
of objective verifiable evidence. Significant management judgment is required in determining the Company's provision for income taxes, the Company's deferred tax assets and liabilities and any
valuation allowance recorded against those net deferred tax assets. The Company evaluates the weight of all available evidence to determine whether it is more likely than not that some portion or all
of the net deferred income tax assets will not be realized.

Income
taxes include the largest amount of tax benefit for an uncertain tax position that is more likely than not to be sustained upon audit based on the technical merits of the tax
position. Settlements with tax authorities, the expiration of statutes of limitations for particular tax positions, or obtaining new information on particular tax positions may cause a change to the
effective tax rate. The Company recognizes accrued interest related to unrecognized tax benefits as interest expense and penalties as operating expense.

Net Loss per Share

Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number
of common shares outstanding (the denominator) for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include
the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued, calculated using the treasury stock method.

Because
the Company had a net loss for each of the years ended December 31, 2010, 2009, and 2008, any common shares related to outstanding stock options, restricted stock,
restricted stock units and convertible debt have been excluded from the calculation of net loss per share because the effect would have been anti-dilutive.

Recent Accounting Pronouncements

In September 2009, the FASB issued a new accounting standard to provide guidance on revenue recognition criteria for multiple-element
arrangements. The new accounting standard modifies the criteria used to separate elements in a multiple-element arrangement by introducing the concept of best estimate of selling price, establishing a
hierarchy of evidence for determining selling price (fair value), requiring the use of relative selling price method and prohibiting the use of the residual method to allocate arrangement
consideration among units of accounting. The new accounting standard also expands the disclosure requirements for all multiple element arrangements and is effective

F-10

---



prospectively
for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 (January 1, 2011 for a calendar year-end
entity). We believe the adoption of the new accounting standard will not have a material impact on the Company's future operating results.

Note 3.  Restricted Cash

The components of restricted cash are as follows:

December 31,2010

2009(in thousands)Cash collateralizing standby letters of credit




$
1,550Bank guarantees





5,613Statutory liability deposit

$
107


$
107

$
7,163


In
addition to guarantees that are cash collateralized, the Company has surety bonds related to value added tax claims and refunds in Europe of approximately $7.2 million at
December 31, 2010 and standby letters of credit issued under the credit line of $1.6 million. Restricted cash is reflected in current or non-current assets based on the
expiration of the requirement with the bank or counterparty.

Note 4.  Accounts Receivable, net

The components of accounts receivable are as follows:

December 31,2010

2009(in thousands)Trade receivables

$
59,245

$
21,484Allowance for doubtful accounts


(1,357
)

(2,390
)$
57,888

$
19,094


Note 5.  Inventories, net

The components of inventories are as follows:

December 31,2010

2009(in thousands)Raw materials

$
74,596

$
69,661Work in process


29,848


27,654Finished goods (completed systems)


5,209


17,243$
109,653

$
114,558


When
recorded, inventory reserves are intended to reduce the carrying value of inventories to their net realizable value. The Company establishes inventory reserves when conditions exist
that indicate inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for the Company's products or market conditions. The Company regularly
evaluates the ability to realize the value of inventories based on a combination of factors including the following: forecasted sales or usage, estimated product end of life dates, estimated current
and future market value and new product introductions. Purchasing and usage alternatives are also explored to mitigate inventory exposure. As of December 31, 2010 and 2009, inventories are
stated net of inventory reserves of

F-11

---



$27.5 million
and $37.0 million respectively. The decrease in inventory reserves in 2010 is primarily due to the disposal of $11.2 million of previously reserved inventory. There
were no material sales of previously reserved inventory during each of the fiscal years ended December 31, 2010, 2009, and 2008.

Note 6.  Property, Plant and Equipment, net

The components of property, plant and equipment are as follows:

December 31,2010

2009(in thousands)Land and buildings

$
79,754

$
79,284Machinery and equipment


5,775


5,967Construction in process


621


6286,150


85,313Accumulated depreciation


(47,556
)

(44,445
)$
38,594

$
40,868


Depreciation
expense was $3.6 million, $3.8 million, and $8.1 million, for the years ended December 31, 2010, 2009, and 2008, respectively. The Company did
not record an impairment charge related to property, plant and equipment in 2010 and 2009. During the fourth quarter of 2008, the Company recorded an impairment charge related to property, plant and
equipment of $17.5 million. (See Impairment of Intangibles and Long-Lived Assets in Note 2).

Note 7.  Goodwill

During the fourth quarter of 2008, the Company determined that the carrying value of the Cleaning and Curing product line exceeded its estimated fair value.
Therefore, the Company performed the second step of the impairment test to determine the implied value of goodwill. Specifically, the Company allocated the estimated fair value of the Cleaning and
Curing product line as determined in the first step to recognized and unrecognized net assets, including allocations to intangible assets such as developed technologies, in-process
research and development, customer relationships and trade names. The result of this analysis indicated that there was no remaining implied value attributable to goodwill and accordingly, the Company
recorded a goodwill impairment charge of $42.1 million, the entire book value of its goodwill, in the fourth quarter of 2008.

F-12

---



Note 8.  Intangible Assets, net

During the fourth quarter of 2008, the Company reviewed the recoverability of intangible assets. In connection with this analysis, management determined that
there were no future cash flows associated with these assets and therefore no fair value was ascribed to them. As a result, the Company recorded a non-cash impairment charge of
$8.3 million in the fourth quarter of 2008.

December 31, 2008Cost

Accumulated
Amortization

Impairment
of long
lived assets

Net Book
Value(in thousands)Developed technology

$
48,030

$
40,550

$
7,480

$
Customer list


903


506


397


Software licenses


877


453


424


$
49,810

$
41,509

$
8,301

$



Amortization
expense for intangible assets was $0.0 million, $0.0 million, and $2.6 million, for each of the years ended December 31, 2010, 2009, and 2008,
respectively.

Note 9.  Assets Manufactured for Internal Use

The components of assets manufactured for internal use, included in amounts reported as other assets, are as follows:

December 31,2010

2009(in thousands)Cost

$
16,148

$
16,446Accumulated depreciation


(3,768
)

(3,820
)$
12,380

$
12,626


These
products are used in-house for research and development, training, and customer demonstration purposes. Costs are amortized to expense over three to five years.
Amortization expense was $3.3 million, $3.8 million, and $11.4 million, for the years ended December 31, 2010, 2009, and 2008, respectively.

In
the fourth quarter of 2008, the Company recorded an impairment charge to other assets of $21.1 million. The sum of the expected undiscounted future cash flows of the long lived
asset group that included these assets was less than the carrying amount of the asset group. The measure of impairment for these assets was based upon an analysis of the fair value compared to the
carrying value as described in Note 2. The Company established the fair value of the other assets based upon its best alternative use, which would be the sale of these tools as used inventory.
The Company has a history of used tool sales that supports a range of fair value for these assets. The timing of the impairment event in the fourth quarter of 2008 primarily related to the industry
downturn and an anticipated decrease in future cash flows derived from the long-lived asset group that includes these internal use
tools, including significant change in the manner in which other assets were being used resulting in excess and or idle tools.

F-13

---



Note 10.  Restructuring Charges

The company incurred no restructuring charges for the year ended December 31, 2010. Changes in the Company's restructuring liability, included in amounts
reported as other liabilities, for the year ended December 31, 2010 are as follows:

Severance(in thousands)Balance at December 31, 2009

$
297Cash payments


(126
)Balance at December 31, 2010

$
171


In
May of 2009, the Company implemented a reduction in force of approximately 20 percent of the Company's global workforce and continued cost reduction initiatives throughout 2009
related to planned actions taken by management to control costs and improve the focus of its operations in order to sustain future profitability and conserve cash. These reductions in force resulted
in a total charge to restructuring expense of approximately $6.1 million related to severance and related costs, offset by the reversal of $0.6 million of accrued compensation expenses
related to terminated employees. A charge to expense of $5.5 million was recorded through December 31, 2009. Through December 31, 2009, a total of $6.5 million was paid,
which included $0.3 million paid in the fourth quarter of 2009.

Changes
in the Company's restructuring liability, included in amounts reported as other liabilities, for the year ended December 31, 2009 are as follows:

Severance(in thousands)Balance at December 31, 2008

$
746Restructuring expense


6,084Cash payments


(6,533
)Balance at December 31, 2009

$
297


In
October of 2008, the Company implemented a reduction in force to further reduce costs to mitigate deteriorating industry fundamentals. This reduction in force resulted in a
restructuring charge to expense of approximately $3.9 million, principally for separation and outplacement costs, of which $3.4 million was recorded in the fourth quarter of 2008 and the
remainder was recorded in the first quarter of 2009. A total of $2.9 million was paid through December 31, 2008.

In
May 2008, the Company implemented a reduction in force in connection with planned actions taken by management to control costs to provide future profitability and conserve cash. This
reduction in force resulted in a total charge to expense of approximately $3.6 million principally for separation and outplacement costs, of which $3.5 million had been recognized as
expense through December 31, 2008. The remaining $0.1 million was recognized in the first quarter of 2009. A total of $3.4 million was paid through December 31, 2008.

F-14

---



Changes
in the Company's restructuring liability, included in amounts reported as other liabilities, for the year ended December 31, 2008 are as follows:

Severance(in thousands)Balance at December 31, 2007

$
916Restructuring expense


6,873Cash payments


(7,043
)Balance at December 31, 2008

$
746


Note 11.  Product Warranty

The Company offers a one to three year warranty for all of its products, the terms and conditions of which vary depending upon the product sold. For all systems
sold, the Company accrues a liability for the estimated cost of standard warranty at the time of system shipment and defers the portion of systems revenue attributable to the fair value of
non-standard warranty. Costs for non-standard warranty are expensed as incurred. Factors that affect the Company's warranty liability include the number of installed units,
historical and anticipated product failure rates, material usage and service labor costs. The Company periodically assesses the adequacy of its recorded liability and adjusts the amount as necessary.

Changes
in the Company's product warranty liability are as follows:

Years Ended December 31,2010

2009

2008(in thousands)Balance at January 1 (beginning of year)

$
726

$
3,530

$
6,245Warranties issued during the period


3,722


791


2,564Settlements made during the period


(1,923
)

(2,363
)

(5,419
)Changes in estimate of liability for pre-existing warranties during the period


188


(1,232
)

140Balance at December 31 (end of year)

$
2,713

$
726

$
3,530Amount classified as current

$
2,556

$
638

$
3,137Amount classified as long-term


157


88


393Total Warranty Liability

$
2,713

$
726

$
3,530


Note 12.  Financing Arrangements

Convertible Subordinated Debt

On March 30, 2009, Axcelis used $85 million of the proceeds of its sale of SEN to pay in full its outstanding 4.25%
Convertible Senior Subordinated Notes which it had issued in May 2006.

Bank Credit Facility

On March 12, 2010, the Company amended its existing revolving credit facility with a bank. The amended agreement provides for
borrowings up to the lesser of $20 million or specified percentages of the amounts of qualifying accounts receivable and inventory. The facility has certain financial covenants requiring us to
maintain minimum levels of operating results and liquidity. On May 25, 2010 the Company and its lender agreed to modify a financial covenant in the revolving credit facility regarding maximum
allowable quarterly losses. Based on current forecasts, we believe we will be in compliance with the financial covenants throughout the remaining term of the facility. Borrowings made under the

F-15

---



facility
will bear interest at the greater of 6% or the bank's prime rate plus 2%. At no time during the term of the agreement has the company borrowed against the facility and $18.4 million
was available for borrowing as of December 31, 2010. The agreement will terminate on March 11, 2011. The Company is currently in negotiations with several banks for a new revolving
credit facility on more favorable terms than our current credit facility. The Company expects the new credit facility to be in place during the
second quarter of 2011. The Company has requested and has been granted a 30 day extension to its existing credit facility until April 10, 2011.

Note 13.  Defined Contribution Plan

The Company maintains the Axcelis Long-Term Investment Plan, a defined contribution plan. All regular employees are eligible to participate and may
contribute up to 35% of their compensation on a before-tax basis subject to IRS limitations. Highly compensated employees may contribute up to 16% of their compensation on a
before-tax basis subject to IRS limitations. Through 2008, the Company matched employee contributions in an amount equal to the greater of (A) 100% of the employee's
pre-tax contributions up to one thousand dollars or (B) 50% of the employee's pre-tax contributions, up to the first 6% of eligible compensation. Under this plan,
approximately $1.6 million was recognized as expense for the year ended December 31, 2008. The Company suspended matching contributions in 2009, so no expense was recorded for this plan
in either 2010 or 2009.

Note 14.  Stock Award Plans and Stock-Based Compensation

2000 Stock Plan

The Company maintains the Axcelis Technologies, Inc. 2000 Stock Plan (the "2000 Plan"), a stock award and incentive plan which
permits the issuance of options, stock appreciation rights, restricted stock, restricted stock units, and performance awards to selected employees, directors and consultants of the Company. The 2000
Plan originally reserved 18.5 million shares of common stock for future grant, which amount was subsequently increased to 33.2 million shares of common stock. The 2000 Plan expires in
2012. At December 31, 2010 there were 9.9 million shares of common stock available for future grant. At December 31, 2010, stock awards outstanding under the 2000 Plan included
stock options, restricted stock and restricted stock units.

Expiration
of non-qualified stock options or stock appreciation rights is based on award agreements. Non-qualified stock options typically expire ten years from
date of grant, but, if approved by the Board of Directors, may have a stated term in excess of ten years. Incentive stock option awards expire ten years from the date of grant. Generally, options
granted to employees terminate upon termination of employment. Under the terms of the 2000 Plan, the exercise price, determined by the Board of Directors, may not be less than the fair market value of
a share of the
Company's common stock on the date of grant. Stock options granted to employees generally vest over a period of four years, while stock options granted to non-employee members of the
Company's Board of Directors generally vest over a period of 6 months and, once vested, are not affected by the director's termination of service to the Company. The Company settles stock
option exercises with newly issued common shares.

Generally,
unvested restricted stock and restricted stock unit awards expire upon termination of service to the Company. Restricted stock or restricted stock unit awards granted to
employees generally vest over a period of four years, while restricted stock or restricted stock units granted to members of the Company's Board of Directors generally vest over a period of six
months. The Company plans to settle restricted stock units upon vesting with newly issued common shares.

Under
the 2000 Plan, fair market value is defined as the closing price of a share of the common stock on the Nasdaq Global Select Market as of any applicable date, as long as the
Company's shares are traded on such exchange.

F-16

---



Grant-Date Fair Value

For the purpose of valuing stock options, the Company uses the Black-Scholes option pricing model to calculate the
grant-date fair value of an award. The fair values of options granted were calculated using the following estimated weighted-average assumptions:

Years ended December 31,2010

2009

2008Weighted-average expected volatility


97.8
%

76.5
%

76.5
%Weighted-average expected term (in years)


6.2


5.5


5.5Risk-free interest rate


1.5-2.0
%

2.1-2.6
%

1.6-2.4
%Expected dividend yield


0
%

0
%

0
%


Expected
volatilityThe Company is responsible for estimating volatility and has considered a number of factors when estimating volatility. The Company's method of estimating
expected volatility for all stock options granted relies on a combination of historical and implied volatility. The Company believes that this blended volatility results in a more accurate estimate of
the grant-date fair value of employee stock options because it more appropriately reflects the market's current expectations of future volatility.

Expected
termWeighted average expected term was calculated using a forward looking lattice model of the Company's stock price incorporating a suboptimal exercise factor and
a projected post-vest forfeiture rate.

Risk-free
interest rateThe yield on zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term assumption is used
as the risk-free interest rate.

Expected
dividend yieldExpected dividend yield was not considered in the option pricing formula since the Company does not pay dividends and has no current plans to do so in
the future.

Stock-Based Compensation Expense

The Company estimates the fair value of stock options using the Black-Scholes valuation model. The fair value of the Company's
restricted stock and restricted stock units is calculated based upon the fair market value of the Company's stock at the date of grant.

The
Company uses the straight-line attribution method to recognize expense for stock-based awards such that the expense associated with awards is evenly recognized throughout
the period.

The
amount of stock-based compensation recognized is based on the value of the portion of the awards that are ultimately expected to vest. The Company estimates forfeitures at the time
of grant and revises them, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term "forfeitures" is distinct from "cancellations" or "expirations" and
represents only the unvested portion of the surrendered stock-based award. The Company currently expects, based on a historical analysis, a forfeiture rate of 5% per year, including executive officer
awards.

The
Company recognized stock-based compensation expense of $4.1 million, $4.7 million and $4.7 million for the years ended December 31, 2010, 2009 and 2008,
respectively. For 2010, 2009 and 2008, the Company primarily used stock options in its annual share-based payment program.

The
benefits of tax deductions in excess of recognized compensation cost is reported as a financing cash flow, rather than as an operating cash flow. Because the Company does not
recognize the benefit of tax deductions in excess of recognized compensation cost due to its cumulative net operating loss position, this had no impact on the Company's consolidated statement of cash
flows as of and for the years ended December 31, 2010, 2009 and 2008.

F-17

---



Stock Options

The following table summarizes the stock option activity for the years ended December 31, 2010, 2009 and 2008:

Options

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value(in thousands)



(years)

(in thousands)Outstanding at December 31, 2007


11,434

$
11.65Granted


5,333


0.71Exercised


(20
)

5.01Canceled


(196
)

5.42Expired


(1,027
)

10.75Outstanding at December 31, 2008


15,524


8.05Granted


4,555


1.11Exercised


(66
)

0.68Canceled


(887
)

1.20Expired


(1,758
)

9.73Outstanding at December 31, 2009


17,368

$
6.43Granted


5,310


1.61Exercised


(704
)

0.79Canceled


(333
)

1.23Expired


(2,693
)

18.26Outstanding at December 31, 2010


18,948

$
3.70


6.91

$
30,171Exercisable at December 31, 2010


8,443

$
6.68


4.31

$
7,455Options Vested or Expected to Vest at December 31, 2010(1)


18,098

$
3.81


6.90

$
26,317


(1)In
addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest is
calculated by applying an estimated forfeiture rate to the unvested options.


Of
the options outstanding at December 31, 2010, 2009, and 2008, 8,443, 9,335, and 9,805, respectively, were vested and exercisable with a weighted average exercise price of
$6.68, $11.12, and $12.13, respectively. The total intrinsic value of options exercised (i.e. the difference between the market price at exercise and the price paid by the employee to exercise
the options) for the years ended December 31, 2010, 2009 and 2008 was $1.2, $0.8 and $0.0 million, respectively.

The
total fair value of stock options vested during the year ended December 31, 2010 was $1.5 million. As of December 31, 2010, there was $7.8 million of
total forfeiture adjusted unrecognized compensation cost related to non-vested stock options granted under the 2000 Plan. That cost is expected to be recognized over a weighted-average
period of 3.1 years.

Restricted Stock and Restricted Stock Units

Restricted stock units ("RSUs") represent the Company's unfunded and unsecured promise to issue shares of the common stock at a future
date, subject to the terms of the RSU Award Agreement and the 2000 Plan. The purpose of these awards is to assist in attracting and retaining highly competent employees and directors and to act as an
incentive in motivating selected employees and directors to

F-18

---



achieve
long-term corporate objectives. These RSU awards typically vest over four years for employees and executive officers. The restricted stock awards to directors typically vest over
six months. The fair value of restricted stock unit and restricted stock awards is charged to expense ratably over the applicable service period.

Changes
in the Company's non-vested restricted stock and restricted stock units for the years ended December 31, 2010, 2009, and 2008 are as follows:

Shares/units

Weighted-Average
Grant Date Fair
Value per Share(in thousands)Outstanding at December 31, 2007


2,110

$
6.22Granted


203


4.60Vested


(568
)

6.43Forfeited


(133
)

6.28Outstanding at December 31, 2008


1,612

$
5.94Vested


(798
)

6.04Forfeited


(210
)

5.63Outstanding at December 31, 2009


604

$
5.90Granted


695


1.72Vested


(1,052
)

3.30Forfeited


(19
)

2.94Outstanding at December 31, 2010


228

$
5.38


The
company's offers a net share settlement program to offset the personal income tax obligations of the employee's restricted stock vesting. Vesting activity above reflects shares
vested before net share settlement. As of December 31, 2010, there was $0.7 million of total forfeiture adjusted unrecognized compensation cost related to nonvested restricted stock and
restricted stock units, which is expected to be amortized over a weighted average amortization period of 0.76 years.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (the "Purchase Plan") provides effectively all Axcelis employees the opportunity to purchase common
stock of the Company at less than market prices. Purchases are made through payroll deductions of up to 10% of the employee's salary, subject to certain caps set forth in the Purchase Plan. Employees
may purchase Axcelis common stock at 85% of the market value of the Company's common stock on the day the stock is purchased.

The
Purchase Plan is considered compensatory and as such, compensation expense has been recognized based on the benefit of the discounted stock price, amortized to compensation expense
over each offering period of six months. Compensation expense for the years ended December 31, 2010, 2009, and 2008 was $0.1 million, $0.0 million, and $0.1 million
respectively.

As
of December 31, 2010, there were a total of 2.7 million shares reserved for issuance and available for purchase under the Purchase Plan. There were 0.3, 0.3, and
0.4 million shares purchased under the Purchase Plan for the years ended December 31, 2010, 2009, and 2008 respectively.

Note 15.  Stockholders' Equity

Preferred Stock

The Company may issue up to 30 million shares of preferred stock in one or more series. The Board of Directors is authorized to
fix the rights and terms for any series of preferred stock without

F-19

---



additional
shareholder approval. As of December 31, 2010 and 2009, there were no outstanding shares of preferred stock.

Note 16.  Commitments and Contingencies

Lease Commitments

The Company leases manufacturing and office facilities and certain equipment under operating leases that expire through 2016. Rental
expense was $5.2 million, $5.7 million, and $6.9 million under operating leases. Future minimum lease commitments on non-cancelable operating leases are as follows:

Year ended December 31,

Operating
Leases(in thousands)2011

$
2,9552012


1,9162013


1,4832014


1,3102015


1,027Thereafter


947$
9,638


Purchase Commitments

The Company has non-cancelable contracts and purchase orders for inventory of $59.0 million at December 31,
2010.

Litigation

The Company is not presently a party to any litigation that it believes might have a material adverse effect on its business
operations. The Company is, from time to time, a party to litigation that arises in the normal course of its business operations.

Indemnifications

The Company's system sales agreements typically include provisions under which the Company agrees to take certain actions, provide
certain remedies and defend its customers against third-party claims of intellectual property infringement under specified conditions and to indemnify customers against any damage and costs awarded in
connection with such claims. The Company has not incurred any material costs as a result of such indemnifications and has not accrued any liabilities related to such obligations in the accompanying
consolidated financial statements.

Note 17.  Business Segment, Geographic Region Information, and Significant Customers

Axcelis operates in one business segment, which is the manufacture of capital equipment for the semiconductor manufacturing industry. The principal market for
semiconductor manufacturing equipment is semiconductor manufacturers. Substantially all sales are made directly by Axcelis to customers located in the United States, Europe and Asia Pacific.

Axcelis'
ion implantation systems product line includes high current, medium current and high energy implanters. Other products include dry strip equipment, curing systems, and thermal
processing systems. In addition to equipment, Axcelis provides post-sales equipment service and support, including spare parts, equipment upgrades, maintenance services and customer
training.

F-20

---



Revenue
by product lines is as follows:

Years ended December 31,2010

2009

2008(in thousands)Ion implantation systems, services, and royalties

$
232,335

$
110,946

$
204,886Other products systems, services, and royalties


42,877


22,076


45,328$
275,212

$
133,022

$
250,214


Revenue
and long-lived assets by geographic region, based on the physical location of the operation recording the sale or the asset, are as follows:

Revenue

Long-Lived
Assets(in thousands)2010United States

$
190,819

$
50,532Europe


33,822


Asia Pacific


50,571


442$
275,212

$
50,9742009United States

$
83,790

$
53,494Europe


23,063


Asia Pacific


26,169


$
133,022

$
53,4942008United States

$
175,041

$
56,083Europe


29,605


Asia Pacific


45,568


$
250,214

$
56,083


Long-lived
assets consist of property, plant and equipment, net and assets manufactured for internal use. Operations in Europe and Asia Pacific consist of sales and service
organizations.

International
revenue, including export sales from U.S. manufacturing facilities to foreign customers, sales by foreign subsidiaries and branches, and royalties was $208.5 million
(75.8% of total revenue) in 2010, $83.5 million (62.8% of total revenue) in 2009, and $161.9 million (64.7% of total revenue) in 2008.

One
customer accounted for 18.6% of consolidated revenue and two customers accounted for 30.2% and 10.4% of consolidated accounts receivable, respectively at December 31, 2010. No
customer accounted for more than 10% of consolidated revenue or consolidated accounts receivable at December 31, 2009. One customer accounted for 11.7% of revenue and 12.0% of consolidated
accounts receivable at December 31, 2008.

F-21

---



Note 18.  Income Taxes

Loss before income taxes is as follows:

Years ended December 31,2010

2009

2008(in thousands)United States

$
(21,526
)
$
(78,185
)
$
(193,451
)Foreign


4,265


4,820


1,315Equity income (loss) of SEN





(3,238
)

(3,667
)Loss before income taxes

$
(17,261
)
$
(76,603
)
$
(195,803
)


Income
taxes (credits) are as follows:

Years ended December 31,2010

2009

2008(in thousands)Current:United StatesFederal

$


$
5

$
8State


309


99


136Foreign


1528


1,526


528Total current


1,837


1,630


672Deferred:Foreign


(1,525
)

(765
)

189Total deferred


(1,525
)

(765
)

189Income taxes

$
312

$
865

$
861


Reconciliations
of income taxes at the United States Federal statutory rate to the effective income tax rate are as follows:

Years ended December 31,2010

2009

2008(in thousands)Income credit at the United States statutory rate

$
(6,041
)
$
(26,812
)
$
(68,531
)State income taxes


309


99


136Impairment of goodwill








14,740Unrecognized tax benefits


842





Unremitted earnings of foreign subsidiaries





705


5,965Effect of change in valuation allowance


6,550


(21,446
)

45,586Foreign income tax rate differentials


(1,490
)

(926
)

68Restoration of foreign deferred tax assets


(1,329
)




Equity loss of SEN





1,133


1,283Taxable gain on sale of investment in SEN





41,973


Deemed distribution from foreign subsidiaries


2,152


3,914


Other, net


(681
)

2,225


1,614Income taxes

$
312

$
865

$
861


F-22

---



Significant
components of current and long-term deferred income taxes are as follows:

As of December 31,2010

2009Current

Long Term

Current

Long Term(in thousands)Federal net operating loss carryforwards

$


$
75,459

$


$
58,261State net operating loss carryforwards





2,812





2,058Foreign net operating loss carryforwards





1,723





3,435Federal tax credit carryforwards





15,087





15,954State tax credit carryforwards





9,205





10,535Unremitted earnings of foreign subsidiaries





(1,589
)




(6,670
)Intangible assets


82


898


87


1,084Property, plant and equipment





6,627





6,752Accrued compensation


1,642





1,549


Inventories


17,519





34,777


Stock compensation





4,038





3,422Warranty


938


57


238


32Other


74


3,914


892


3,930Deferred taxes, gross


20,255


118,231


37,543


98,793Valuation allowance


(18,174
)

(116,723
)

(35,464
)

(98,809
)Deferred taxes, net

$
2,081

$
1,508

$
2,079

$
(16
)


At
December 31, 2010, the Company had $138.5 million of deferred tax assets relating to net operating loss carryforwards, tax credit carryforwards and other temporary differences, which
are available to reduce income taxes in future years. A valuation allowance must be established when it is "more likely than not" that all or a portion of deferred tax assets will not be realized. A
review of all available positive and negative evidence needs to be considered, including a company's performance, the market environment in which the company operates length of carryback and
carryforward periods, existing sales backlog, and projections of future operating results. Where there are cumulative losses in recent years there is a strong presumption that a valuation allowance is
needed. This presumption can be overcome in very limited circumstances.

The
Company is in a three year cumulative loss position in the United States. As a result, the Company maintains a 100% valuation allowance for entities in those tax jurisdictions to
reduce the carrying value of deferred tax assets to zero. The Company will continue to maintain a full valuation allowance for those tax assets until sustainable future levels of profitability are
evident.

Changes
in the valuation allowance in 2010 and 2009 were attributable to changes in the composition of temporary differences and changes in net operating loss carryforwards. In addition,
during 2010 the Company performed an evaluation of the deferred tax assets of certain of its foreign subsidiaries. Based on the subsidiaries recent and expected ability to generate taxable income, the
Company reduced the subsidiary's corresponding valuation allowance and recognized a tax benefit of $1.3 million.

At
December 31, 2010, the Company has federal and state net operating loss carryforwards of approximately $217.3 million and foreign net operating loss carryforwards of approximately
$9.3 million expiring principally between 2021 and 2030.

The
Company has research and development and other tax credit carryforwards of approximately $18.7 million at December 31, 2010 that can be used to reduce future federal and state income
tax liabilities. These tax credit carryforwards expire principally between 2021 and 2028. In addition, the

F-23

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Company
has foreign tax credit carryforwards of approximately $5.6 million at December 31, 2010 that are available to reduce future U.S. income tax liabilities subject to certain limitations.
These foreign tax credit carryforwards expire between 2012 and 2016.

The
Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company and most foreign subsidiaries are
subject to income tax examinations by tax authorities for all years dating back to 2001. The Company's policy is to recognize interest related to unrecognized tax benefits as interest expense and
penalties as operating expenses. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities
are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter.

At
December 31, 2010, the Company had unrecognized tax benefits of approximately $7.0 million, of which approximately $4.7 million reduced the Company's deferred tax assets and the
offsetting valuation allowance and $2.2 million was recorded in other long-term liabilities. The Company does not expect any significant changes in unrecognized tax benefits in 2011.

A
reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:

2010

2009(in thousands)Balance at beginning of year

$
5,934

$
5,824Increases in unrecognized tax benefits as a result of tax positions taken during a prior period


189


110Increases in unrecognized tax benefits as a result of tax positions taken during the current period


842


Balance at end of year

$
6,965

$
5,934Recorded as other long-term liability

$
2,246

$
1,302Recorded as a decrease in deferred tax assets and offsetting valuation allowance


4,719


4,632$
6,965

$
5,934


Note 19.  SEN

Until March 30, 2009, the Company owned 50% of the equity of a joint venture with Sumitomo Heavy Industries, Ltd. ("SHI") in Japan. This joint
venture, which was known as SEN was established in 1982 and licensed technology from the Company relating to the manufacture of specified ion implantation products and had exclusive rights to
manufacture and sell these products in the territory of Japan. On March 30, 2009, pursuant to a Share Purchase Agreement dated February 26, 2009, the Company sold to SHI all of the
Company's common shares in SEN in exchange for a cash payment of 13 billion Yen, which resulted in proceeds of approximately $132.8 million before advisor fees and other expenses of
$10.6 million. The sales price was determined through an arm's length negotiation. This transaction
terminated all prior agreements among the three parties relating to the SEN joint venture. In addition, an arbitration the Company had initiated against SEN in Tokyo was dismissed.

In
connection with the sale of the Company's investment in SEN, on March 30, 2009, the Company and SEN entered into a License Agreement pursuant to which the parties have cross
licensed each other to use certain ion implant patents and technical information on a non-exclusive, perpetual, royalty-free, worldwide basis, provided that both received sole
exclusive licenses for 4 years in the U.S. and Japan, respectively. The licenses to technical information cover only technical information shared by the parties prior to the date of the
license, so the license to SEN does not cover technical information relating to the Optima HD and Optima XE. The license also excludes patents relating to the Company's work in molecular implant and
certain patents developed for the Optima HD and

F-24

---



Optima
XE. The parties provided each other with limited warranties regarding their right to grant these licenses, and indemnity with respect thereto, but disclaim any warranty regarding the validity
or freedom from infringement of the licensed intellectual property. Neither party will provide any support for the other party's use of the licensed intellectual property.

The
sale of the Company's investment in SEN on March 30, 2009, resulted in a gain of approximately $1.1 million. This gain includes net proceeds of $122.2 million
(after payment of advisor fees and other costs of $10.6 million) and cumulative foreign translation gain of $23.5 million, previously recorded in other comprehensive income, reduced by
the carrying value of the investment on the date of sale of $144.6 million. The gain from the sale of the Company's investment in SEN is recorded in other income.

Note 20.  Quarterly Results of Operations (unaudited)

Dec. 31,
2010

Sept. 30,
2010

June 30,
2010

March 31,
2010

Dec. 31,
2009

Sept. 30,
2009

June 30,
2009

March 31,
2009(in thousands, except per share data)Revenue

$
93,403

$
75,106

$
58,203

$
48,500

$
38,737

$
35,007

$
33,550

$
25,728Gross profit


31,493


21,470


19,868


13,007


11,351


7,820


5,886


3,007Net income (loss)


4,330


(6,273
)

(4,529
)

(11,101
)

(10,036
)

(15,898
)

(22,379
)

(29,155
)Net income (loss) per share basic and diluted

$
0.04

$
(0.06
)
$
(0.04
)
$
(0.11
)
$
(0.10
)
$
(0.15
)
$
(0.22
)
$
(0.28
)


Results
of operations for the quarters ended September 30, 2009, June 30, 2009 and March 31, 2009 included restructuring charges of $0.4 million,
$4.1 million and $1.0 million respectively.

Results
of operations for the quarter ended December 31, 2010 include a tax benefit of $1.3 million related to the restoration of deferred tax assets in certain foreign
jurisdictions.

F-25

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Signatures

Pursuant to the requirements of Section 13 or 15(d) 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.

AXCELIS TECHNOLOGIES, INC.By:

/s/ MARY G. PUMADated: March 14, 2011



Mary G. Puma,Chief Executive Officer


Pursuant
to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date
indicated.

Signature

Title

Date/s/ MARY G. PUMA Mary G. Puma

Director and Principal Executive Officer

March 14, 2011/s/ JAY ZAGER Jay Zager

Principal Accounting and Financial Officer

March 14, 2011/s/ R. JOHN FLETCHER R. John Fletcher

Director

March 14, 2011/s/ STEPHEN R. HARDIS Stephen R. Hardis

Director

March 14, 2011/s/ WILLIAM C. JENNINGS William C. Jennings

Director

March 14, 2011/s/ PATRICK H. NETTLES Patrick H. Nettles

Director

March 14, 2011/s/ H. BRIAN THOMPSON H. Brian Thompson

Director

March 14, 2011/s/ GEOFFREY WILD Geoffrey Wild

Director

March 14, 2011/s/ EDWARD H. BRAUN Edward H. Braun

Director

March 14, 2011


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Exhibit Index

Exhibit No.

Description3.1

Amended and Restated Certificate of Incorporation of the registrant, as adopted May 6, 2009. Incorporated by reference to Exhibit 3.1 of the Company's Form 8-K filed with the Commission on May 11,
2009.3.2

Bylaws of the Company, as amended as of August 8, 2007. Incorporated by reference to Exhibit 3.2 of the Company's Form 10-Q for the quarter ended June 30, 2007, filed with the Commission on
August 9, 2007.4.1

Specimen Stock Certificate. Incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-1 (Registration No. 333-36330).10.1*

Axcelis Technologies, Inc. 2000 Stock Plan, as amended through June 23, 2005. Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on
June 28, 2005.10.2*

Axcelis Management Incentive Plan, as amended and restated by the Compensation Committee of the Board of Directors on February 11, 2010. Incorporated by reference to Exhibit 10.2 of the Company's report on
Form 10-K for the year ended December 31, 2009 filed with the Commission on March 15, 2010.10.3

Form of Indemnification Agreement entered into by the Company with each of its directors and executive officers. Incorporated by reference to Exhibit 10.2 of the Company's Registration Statement on Form S-1
(Registration No. 333-36330).10.4*

Form of Change in Control Agreement, as approved by the Board of Directors on October 16, 2007 and first effective on November 6, 2007, between the Company and each of its executive officers. Incorporated by
reference to Exhibit 10.4 of the Company's report on Form 10-Q for the quarter ended September 30, 2007 filed with the Commission on November 8, 2007.10.5*

Form of Employee non-qualified stock option grant under the 2000 Stock Plan, updated as of April 5, 2002. Incorporated by reference to Exhibit 10.1 of the Company's report on Form 10-Q filed with the
Commission on November 9, 2004.10.6*

Form of Non-Employee Director stock non-qualified stock option grant under the 2000 Stock Plan, updated as of July 12, 2004. Incorporated by reference to Exhibit 10.2 of the Company's report on
Form 10-Q filed with the Commission on November 9, 2004.10.7*

Form of Restricted Stock Agreement for use under the 2000 Stock Plan. Incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the Commission on June 28,
2005.10.8*

Form of Restricted Stock Unit Award Agreement for use under the 2000 Stock Plan. Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the Commission on
June 28, 2005.10.9*

Named Executive Officer Base Compensation at March 14, 2011. Filed herewith.10.10*

Non-Employee Director Cash Compensation at March 14, 2011. Filed herewith.10.11*

Amended and Restated Employment Agreement between the Company and Mary G. Puma dated November 6, 2007. Incorporated by reference to Exhibit 10.3 of the Company's report on Form 10-Q for the quarter
ended September 30, 2007 filed with the Commission on November 8, 2007.


---



Exhibit No.

Description10.12*

Letter from Mary G. Puma to the Board of Directors dated May 1, 2009, modifying her Amended and Restated Employment Agreement with the Company. Incorporated by reference to Exhibit 10.1 of the Company's report
on Form 8-K filed with the Commission on May 11, 2009.10.13

Amended and Restated Loan and Security Agreement dated as of March 12, 2010 between the Company and Axcelis Technologies CCS Corporation, as borrowers, and Silicon Valley Bank. Incorporated by reference to
Exhibit 10.1 to the Company's report on Form 10-Q for the quarter ended March 31, 2010 filed with the Commission on May 12, 2010.10.14

Export-Import Loan and Security Agreement dated as of March 12, 2010 between the Company and Axcelis Technologies CCS Corporation, as borrowers, and Silicon Valley Bank. Incorporated by reference to
Exhibit 10.1 to the Company's report on Form 10-Q for the quarter ended March 31, 2010 filed with the Commission on May 12, 2010.10.15

First Loan Modification Agreement entered into as of May 25, 2010 among the Company, Axcelis Technologies CCS Corporation and Silicon Valley Bank. Incorporated by reference to Exhibit 10.1 to the Company's
report on Form 8-K filed with the Commission on May 27, 2010.10.16

License Agreement dated as of March 30, 2009 between the Company and SEN Corporation. Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on
April 3, 2009.14.1

Ethical Business Conduct at Axcelis, revised through January 2003. Incorporated by reference to Exhibit 14.1 of the Company's report on Form 10-K filed with the Commission on March 28, 2003.21.1

Subsidiaries of the Company. Filed herewith.23.1

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. Filed herewith.31.1

Certification of the Principal Executive Officer under Exchange Act Rule 13a-14(a)/15d-14(a) (Section 302 of the Sarbanes-Oxley Act), dated March 14, 2011. Filed herewith.31.2

Certification of the Principal Financial Officer under Exchange Act Rule 13a-14(a)/15d-14(a) (Section 302 of the Sarbanes-Oxley Act), dated March 14, 2011. Filed herewith.32.1

Certification of the Principal Executive Officer pursuant to Section 1350 of Chapter 63 of title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act), dated March 14, 2011. Filed
herewith.32.2

Certification of the Principal Financial Officer pursuant to Section 1350 of Chapter 63 of title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act), dated March 14, 2011. Filed
herewith.


*Indicates
a management contract or compensatory plan.


You may obtain a copy of any of these exhibits free of charge either on our website at http://www.axcelis.com or by contacting Investor Relations at Axcelis
Technologies, Inc., 108 Cherry Hill Drive, Beverly, MA 01915-1053.

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Schedule IIValuation and Qualifying Accounts  Axcelis Technologies, Inc.  (In thousands)

Balance at
Beginning of
Period

Charged to
Costs and
Expenses

Deductions

Other(*)

Balance at
End of
PeriodYear Ended December 31, 2010Allowance for doubtful accounts and returns

$
2,390

$
(1,120
)
$
(17
)
$
104

$
1,357Reserve for excess and obsolete inventory


36,980


2,015


(11,224
)

(254
)

27,517Year Ended December 31, 2009Allowance for doubtful accounts and returns

$
2,545

$
(88
)
$


$
(67
)
$
2,390Reserve for excess and obsolete inventory


47,656


9,818


(20,732
)

238


36,980Year Ended December 31, 2008Allowance for doubtful accounts and returns


2,927


308


(691
)

1


2,545Reserve for excess and obsolete inventory


25,071


24,631


(2,596
)

550


47,656


(*)Represents
foreign currency translation adjustments.


---