Operator: Good day, everyone, and welcome to the Veeco Third Quarter 2011 Earnings Conference. Today's call is being recorded.

For opening remarks and introductions, I would now turn the conference over to Senior Vice President of Corporate Communications and Investor Relations, Ms. Debra Wasser. Ms. Wasser, Please go ahead.

Debra Wasser - SVP, IR and Corporate Communications: Thank you, operator, and thank you all for joining today's call. I'm Deb Wasser, Veeco's Senior Vice President of Investor Relations. Joining me today are our CEO, John Peeler, and our CFO, Dave Glass. Today's earnings release was distributed 4.00 pm this afternoon and is available on the Veeco website. Please note that we have prepared a slide presentation to accompany today's webcast. We encourage you to follow along with the slides on veeco.com.

This call is being recorded by Veeco Instruments and is copyrighted material. It cannot be recorded or rebroadcast without Veeco's expressed permission. Your participation implies consent to our taping.

To the extent that this call discusses expectations about market conditions, market acceptance, and future sales of the Company's products, future disclosures, future earnings expectations, or otherwise makes statements about the future, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These factors are discussed in the business description and management's discussion and analysis sections of the Company's report on Form 10-K and Annual Report to shareholders, and in our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K, and press releases. Veeco does not undertake any obligation to update any forward-looking statements, including those made on this call, to reflect future events or circumstances after the date of such statement.

During this call, management may address non-GAAP financial measures. Information regarding such non-GAAP financial measures, including reconciliation to GAAP measures of performance is available on our website.

I'll now turn the call over to John for opening remarks.

John R. Peeler - CEO: Thanks Deb, and thank you all for joining our call. Dave is going to start off by reviewing our third quarter results, after that I will provide an update on our outlook and our guidance and then we will take your questions.

David D. Glass - EVP and CFO: Thanks John. Turning to Slide 5, Veeco's third quarter 2011 revenue was $268 million, up 1% sequentially, but down 3% from last year's third quarter. As we've discussed in the past few quarters the timing of revenue continues to be hard to predict in China as facility readiness and funding availability continue to be significantly challenges for us.

However, we accurately assess these risks when setting our guidance and we are pleased to have delivered a solid quarter just above the mid-point of our range. Please note that all of Veeco's results presented today exclude the CIGS Solar Systems business, which has been reclassified as a discontinued operation.

Veeco's GAAP net income from continuing operations for the quarter was $53 million or a $1.31 per share compared to GAAP net income of $94 million or $2.22 per share in the third quarter of 2010. Non-GAAP net income was $53 million or a $1.33 per share for the quarter compared to $65 million or $1.55 last year

EBITDA was $78 million or 29% of sales down from $88 million last quarter. These results were at the high end of our guidance. Veeco's operating expenses were $50 million for the quarter down from $51 million last quarter. Gross margin was about 47% declining sequentially as forecasted due to a high concentration of MaxBright MOCVD systems in our quarterly revenue mix.

As we've commented our first article shipments of MaxBright carry higher costs. We had anticipated that these would have a dampening effect on gross margins in the second half of 2011 as they roll through the P&L and then we'll begin to see cost improvement early next year.

Turning to Slide 6, you can see that of our reported $268 million in revenue 87% was contributed by out LED & Solar business and 13% by data storage. Veeco's LED & Solar revenues were $234 million including $220 million in MOCVD. LED & Solar revenues were up 7% sequentially but down 4% from Q3, 2010.

MaxBright MOCVD systems were a very meaningful contributor to our revenue in the third quarter. LED & Solar adjusted EBITDA was $73 million in the third quarter of 2011 compared to $98 million in the third quarter of last year. Data storage revenues were 34 million down 25% sequentially, but flat versus the same period last year. Data storage adjusted EBITDA was $7.9 million in Q3 down from $9.2 million in the third quarter of 2010.

Turning to Slide 7 we reported $133 million in bookings during the quarter, 84% LED & Solar and 16% data storage. Overall orders declined 57% from our record second quarter and 52% from the third quarter of last year.

LED & Solar orders were $112 million down 59% sequentially and 54% compared to the third quarter of last year. MOCVD's bookings were $103 million and MBE booked about $9 million. We completed MOCVD deals in all regions with the exception of Europe. MaxBright Systems were ordered by key customers in China, Taiwan and Japan and several customers ordered single chamber K465i systems including one large multi-unit deal in China where Veeco is the sole supplier.

In Data Storage, we booked $21 million, that's down 44% sequentially and 39% year-over-year. We finished the quarter with $389 million in backlog and a book-to-bill ratio of 0.5 to 1. Note that we recorded backlog adjustments of $34 million this quarter. These adjustments were primarily related to several MOCVD customers who cancelled or substantially pushed out the dates for tools that were on order.

Lastly, let's turn our focus to the balance sheet on Slide 8. We finished the quarter with cash and short-term investments of $449 million, down from $633 million at the end of last quarter. Significant uses of cash during the quarter included stock buybacks as well as cash payments to settle contracts related to the discontinuation of our CIGS Solar business. Veeco purchased $154 million of stock at an average price of $38.63 per share during the quarter.

In other balance sheet movements during the quarter, working capital changes about offset the positive cash generated from operating income. Inventory balances grew by $14 million, but were offset by $13 million reduction in accounts receivable balances. At the same time deposits declined from $115 million to $78 million, which roughly offset the positive cash flow from operations.

Note that we've completed the full $200 million of share buybacks authorized by our Board of Directors in August of last year at an average price of about $38 per share. These buybacks reflect our continued confidence in Veeco's outlook and we believe they will represent an excellent value for our shareholders in the long run. With $449 million in cash at the end of the third quarter, virtually no debt and the continuing expectation that will generate cash again in Q4 and throughout 2012, we believe the Company has significant flexibility to weather a downturn in business and to fund future growth.

Let me now turn the call over to John to review further highlights for the quarter and discuss our outlook.

John R. Peeler - CEO: Thanks, Dave. Moving to Slide 10, we're proud to delivery against our guidance during the challenging time and aside from a financial performance we had a number of other positives.

Our MaxBright continues to gain wide acceptance from Tier 1 LED manufacturers and it represented nearly half of our MOCVD revenue in the quarter. We've now trained over 200 engineers at our China Training Center and we should be over 300 by the end of the year. Our Taiwan technology center is staffed and operating, and we're working with industry leaders on new technologies and process development.

In data storage, our market position at key customers remains extremely strong. Our customers are placing more emphasis on improving yield and reducing costs and this aligns well with Veeco's strengths. We see good opportunities for our new CVD, PVD and DLC technologies.

Turning to Slide 11; as Dave reported, we've experienced a slowdown in new orders during the third quarter. Ongoing weakness in worldwide TV sales continued to cause factory utilization rates in Asia to remain low and reports indicate that many of our customers' utilization rates are between 50% and 70%.

We've seen decreased business activity in China due to credit tightening and funding availability. In the data storage our customers delayed factory expansion due to weak PC sales and while they wait for regulatory approval of pending mergers and acquisitions.

All in all, we believe that weak global economy and a variety of economic risk factors has caused our customers to slow or postpone capacity expansion. While we have limited visibility, but we currently expect that MOCVD orders will remain depressed for a few quarters, but the Data Storage orders could move up as soon as the M&A regulatory uncertainty clears.

Turning to Slide 22, I will take you tour Q4 revenue and earnings guidance. Q4 revenue should be between an $175 million and $215 million and facility readiness issues and shipment timing uncertainty are already factored into this range.

We expect that lower volume and continued impact of first article MaxBrights will cause gross margins to be between 44% and 45%, operating spending will remain about flat, driving EBITDA to 17% to 22% and non-GAAP EPS of $0.54 to $0.86 per share.

We are really proud that the Company still expects to deliver $1 billion in 2011 revenue and over $5 in EPS at the high end of our guidance and this is a tremendous accomplishment. It speaks to our technology leadership, post connectivity to our customers and our ability to execute in challenging environment.

With the slowdown in the business we are working to decrease our spending levels and productions of about 100 temporary workers and contract manufacturing staff have already occurred. In addition to the impact of our variable cost model we're in the process of taking actions to reduce spending particularly in the G&A category.

Moving to Slide13, while the overall environment is pretty gloomy we do see positive signs in the LED marketplace, there have been reports of rush orders for high spec LED's for new TV models from several top manufacturers. Traction for LED's in Japan has been widely reported with light bulb sales, with LED light bulb sales reaching 60% in the third quarter as Japan is making energy conservation a national imperative.

Philips recently reported solid growth in LED lighting demand which ties to data points from around the U.S. and Europe that indicate a dramatic decline in LED light bulb pricing and lastly our team in China is reporting that LED product subsidies are likely to be soon rolled out. According to strategies unlimited whose data you can see on the right hand of this slide 2012 and 2013 should be an exciting time for the LED industry, as LED lighting pictured here in Orange starts to hit a meaningful inflection point and more LED's are shipped for lighting than for backlighting.

On Slide 14, we have borrowed a slide from LEDinside and a few of the Wall Street firms that lays out timing for incandescent light bulb phase outs around the world and these phase outs will have a large impact on the LED industry as lighting manufacturers have to ensure that their products need a variety of energy efficiency standards.

You can see that in key markets like Europe and the U.K. phase outs are already occurring and in 2012 and 2013 phase outs will begin to occur in many other countries. I think that these phase outs are meaningful because global lighting distributors will need to increase their LED shelf content in order to maintain their space and their market share.

You may have seen previous versions of Slide 15, which we've continue to update in order to give you an Idea of how much of our business is lighting based. As we look at Veeco MOCVD shipments by customer, lighting has continued to increase as a percentage of our system shipments to be 54% through the first nine months of the year. Lot of this demand comes from China where the customer base has a strong focus on lighting.

Turning to our outlook, we are confident that LED pricing declines will continue to stimulate demand for solid-state lighting. We expect wide spread adoption of LED lighting first led by commercial, municipal and industrial sectors which make up about 75% of the lighting market and then followed by residential users.

Despite a large multi-year opportunity of about 5000 MOCVD reactors from 2011 to 2015, some level of cyclicality is to be expected and after two very strong years of MOCVD demand there's a broad expectation that 2012 will be a down year.

Industry data point suggests that the downturn could be very short lived, but it's difficult to judge how the global economic environment may influence our customers' investment plans. So while the near-term market outlook is a bit cloudy, our MOCVD market position is the best it's even been. Recent revenue data indicate that Veeco has closed in on the number one market position and we're well positioned for future share gains as LED lighting accelerates.

In data storage orders have been running at low levels throughout 2011 due to both slowed end market demand and delayed orders for (indiscernible) pending data storage mergers. As the M&A uncertainty is cleared, we expect some pent-up demand to be released.

Additionally, the recent flooding in Thailand has caused widespread devastation to important hard disk drive manufacturing facilities. We are working with our customers to provide assistance and help them get back up and running, and we expect that facility repairs will require additional equipment from Veeco.

So, to wrap up, despite the market downturn, Veeco is well positioned for solid performance in 2012 and beyond. Our exceptional product pipeline and customer momentum, variable costs to operating model, strong balance sheet and proven ability to execute will continue to serve us well. We expect to remain profitable in every quarter and deliver double-digit EBITDA performance during the next year.

Operator: Stephen Chin, UBS Securities LLC.

Stephen Chin - UBS Securities LLC: Just a question on MOCVD orders being depressed for a few quarters, what level do you think industry capacity utilization rates need to recover here before customers resume the orders? Do you also think orders can increase after some of your big China base customers raise more money?

John R. Peeler - CEO: We have a number of customers building facilities in China that have multiyear plans for facility construction and alignments with government subsidy. So we do believe that orders will resume and continue in China. I think utilization rates really only have to go up to the kind of high 80s or so at specific customers before those customers start ordering more equipment, because of course there is a lead time, they are looking at their ramp and projecting when they will need additional equipment and so it's hard to predict the timing, but we are estimating a couple of quarters. So, it might be a couple, might be three it's hard to tell. We don't think it would be took long because there is this tremendous lighting growth momentum behind the whole market.

Stephen Chin - UBS Securities LLC: I had a follow-up question on data storage, I was just wondering John if you have an estimate as to what you think Veeco's typical data storage served addressable market is in millions of dollars, we're just trying to get an estimate of what kind of EPS vehicle can do in 2012 just from data storage if all goes right.

John R. Peeler - CEO: It's hard to predict the served market but I will give you a couple of clues. I think we have over 50% share in the equipment market for thin-film magnetic heads, so at least in every category that we actively sell equipment in well over 50% share, so I think you can double or basically double our pass revenue and get an idea for the market. It is cyclical it does move up and down we have heard from our customers you know that we're holding off on certain orders until we get clarity on whether our either our acquisition or a merger will be approved and so as I think is usually the case when there M&A activity you go through this period of postponed decisions so, I think we'll get some benefit as these are approved and I know the Seagate acquisition of Samsung's business was approved by the EU authorities a week or so ago and that's likely to follow through with the rest of the regulatory bodies pretty quickly WD and HGST may be a little longer but as we get clarity that will help.

Operator: Ahmar Zaman, Piper Jaffray.

Shawn - Piper Jaffray: This is Shawn for Ahmar. You talked earlier a little bit about dialing back OpEx. Can you walk us through a little bit of what your expectations are there for sort of dialing back your SG&A and other expenses there?

David D. Glass - EVP and CFO: Yeah, there's a natural part of our operating expenses that are variable and if we see potential for a downturn, we can turn some dials and make those go away. John mentioned that we've already released the number of our contract and temporary workers for those sorts of things. Just to decompose little bit of an example of what you saw in the third quarter, you saw that our OpEx was down $1 million that's actually composed of R&D spending being up as planned, but SG&A actually pulled back about $4 million is how the million is composed. And a lot of that is just turning the dials and slowing things down as we mentioned.

Shawn - Piper Jaffray: One follow-up. When we look at next year or the next few quarters of depressed orders, when we see orders returning you anticipate they'll return from sort of a ramp in general lighting or do you think it will be a more sort of a return in back lighting demand?

John R. Peeler - CEO: I think there will be a – the overall larger growth driver is going to be general lightings, but I think that back lighting has been relatively depressed for quite a number of quarters here maybe four and if we get some pick up in the consumer electronics markets for LED TVs, laptops things like that, that will help too. So I would expect it's going to be a combination, but as we get farther and farther out in future quarters, lighting is going to make up a more – a larger and larger piece of the total.

Operator: Timothy Arcuri, Citi.

Timothy Arcuri - Citi: I had a couple of questions. First on inventory, can you give us, Dave, maybe a mix finished goods, raw material and WIP and I also wanted to on inventory find out how much of that is MaxBright versus K? Then I had another question.

David D. Glass - EVP and CFO: I can give you the WIP breakdown and finished goods, but we don't actually report MaxBright versus K, Tim. So, let me give you the pieces here. Actually, I don't have right at my finger tips the breakdown by finished and WIP. Let me get back to you on that.

Timothy Arcuri - Citi: I guess then my next question if I may is, Dave you've talked about being able to breakeven even if revenue came down by half or something in that range. So, I'm wondering at this moment if you could give us some sense of what breakeven is? I know that it's variable based on mix and things like that, but it seems like the mix is now shifted almost totally over to MaxBright anyway. So, what is your breakeven or your operating breakeven?

David D. Glass - EVP and CFO: Well, first just clarify. It really hasn't switched almost totally over to MaxBright, but we have done a little bit of refinement of our breakeven look and through our scenario planning this quarter, so let me clarify where we see things today. We believe that today we could be breakeven on an earnings basis, and at levels above $100 million a quarter, and breakeven cash at levels above $75 million a quarter. So that just frame out a little bit and that's with some assumptions of things that we would do and actions that we would take to address the situation. The higher number that we were discussing before kind of assumes that just where the natural variable cost comes out of our picture, and we don't really take any affirmative action. What we have done is we've – since it is our planning cycle right now, we have sharpened the pencil a little and made some assumptions about things that we would put in place in the event we are faced with that.

Timothy Arcuri - Citi: Just to clarify, what action would have to take to get to that breakeven, i.e., what sort of charges would you have to take to get breakeven down to that level?

David D. Glass - EVP and CFO: That's not significant restructuring. Again, we talked before about letting temporary and contract workers go, there is still more in our numbers, it's slowing down programs, a variety of things like that. That's not a significant restructuring assumed though.

Operator: Atif Malik, Morgan Stanley.

Atif Malik - Morgan Stanley: Can you guys talk about tool reuse? Are you seeing any kind of tool we use in the industry, your tools or Aixtron tools given that the demand is slowing down either third parties or your customers?

John R. Peeler - CEO: We have not seen significant examples of tool reuse so far. I think we are prepared to help customers recertify older equipment, refurbish older equipment and move that to different markets and assist with that, but there is not really any tool reuse going on so far in the market.

Atif Malik - Morgan Stanley: Maybe I missed it can you quantify cancellations for MOCVD in the backlog?

David D. Glass - EVP and CFO: For MOCVD only just a moment we had 34 million in total, most of it was MOCVD. That was 33 virtually all MOCVD.

Operator: Srini Sundararajan, Oppenheimer & Co.

Srini Sundararajan - Oppenheimer & Co.: Just wanted to ask you whether, am I correct in interpreting that you think that orders will remain at these levels given that you did a lot of buyback or were the buyback just now necessary to get to $5 EPS?

John R. Peeler - CEO: I think there are two separate events we think that orders will remain depressed not necessarily at these levels for some number of quarters and hard to project that but whether its two or three quarters would probably be our estimate and depressed just means significantly lower than they've been I would say it means below 200 million type of thing, so that's where we think orders will be.

Srini Sundararajan - Oppenheimer & Co.: Just a quick follow-up, what portion of your backlog is in China?

John R. Peeler - CEO: Pretty large piece of the MOCVD backlog is from China and Dave?

David D. Glass - EVP and CFO: It's about 90% in the MOCVD.

John R. Peeler - CEO: How much non-MOCVD backlog do we have?

David D. Glass - EVP and CFO: The non-MOCVD it's about $85 million, non-MOCVD 303 is the MOCVD component of the total 390.

Operator: Krish Sankar, Bank of America-Merrill Lynch.

Krish Sankar - Bank of America-Merrill Lynch: John, couple of questions. You said utilization rates for the industry is around 50% to 70%. Would you agree that Veeco's customer's utilization rates are below that average or are they in line?

John R. Peeler - CEO: I don't see any reason that they're below that average. I think our market share is 50% or better in Korea and is followed in China and has been moving up pretty quickly in Taiwan. So, I'd say it's probably in line.

Krish Sankar - Bank of America-Merrill Lynch: My follow-up was like, when I look at – in terms of your gross margin guidance, is this all due to just volume and initial MaxBright or should we assume that this is kind like the new reality of gross margin? I'm just trying to understand if this pricing had any impact in that?

John R. Peeler - CEO: Yeah, I think first of all we have said in the past that the first 20 or so MaxBrights were going to carry a higher price level or higher cost level and that would depress margins kind of for the rest of this year and that additionally volumes come down. So I wouldn't call it a new reality, but they're certainly going to be lower when we're not shipping at quite so high volumes.

David D. Glass - EVP and CFO: If you remember, at last earnings call, we guided 47%. We're just a few points or few fractions under that, 46.6%. The only reason the MaxBright costing was about on target, reason we're down a little bit as we had a slightly fewer acceptances than were planned originally.

Krish Sankar - Bank of America-Merrill Lynch: So, the pricing environment is pretty rational so?

David D. Glass - EVP and CFO: Is as we forecast.

John R. Peeler - CEO: Pretty much, I mean when you get market downturns, people fight harder, so there tends to be some price pressure.

Operator: Christopher Blansett, JPMorgan.

Christopher Blansett - JPMorgan: John, I just wanted to ask you about momentum for MaxBright into the downturn. Obviously, you would assume that there'd be more customers wanting to evaluate this product if they haven't or maybe bring it up online more so than maybe older generations and equipment. So, one is, how is that momentum continuing even though there is a business slow down? Two, is when do you think you'll get to those 20 units of shipment and then we can start to see the gross margin on the product pick back up?

John R. Peeler - CEO: The momentum is very good. I mean we've had a great reception to the product really in every region. We've had them purchased in every region. We've had them purchased by the top companies, the who's who of LED manufacturing have purchased this product, with few exceptions that maybe just haven't done any recent purchases. So, overall product acceptance is good, interest is very high and I don't think we could be any happier with a new product introduction. When you think about it and we just introduced it back in January. So, it was well received by the market. Dave do you want to comment on when the initial units run out, I believe it's Q4.

David D. Glass - EVP and CFO: Yeah. In Q4 we should start seeing meaningful cost improvement in Q1.

Christopher Blansett - JPMorgan: The second question is, you guys did a good job of buying back shares and went through that funding. So, how should we look at future share repurchase?

John R. Peeler - CEO: We finished the initial $200 million Board authorized plan. The Board has not authorized any additional purchases at this time. If we get a new round authorized, we'll be coming back to you with that news.

Operator: Vishal Shah, Deutsche Bank.

Vishal Shah - Deutsche Bank: Can you talk about the type of orders that you expect from customers over the next couple of quarters? Are you expecting any large orders or you expect smaller volumes of orders? Also can you quantify the impact of Thailand flooding on the potential upside and data storage orders?

John R. Peeler - CEO: I think there'll be some large orders or mid-size orders, may be large gets a new definition during the downturn. I know a few years back we used to think of five units as a really large order and that got kind of swamped out over the last few years. I think there will be significant orders, they may not be 50 unit orders, but there will be significant orders on an ongoing basis, and maybe a little lumpy, which is one of the things that makes it hard to predict. I think there will be significant orders and there will be significant orders from multiple regions. So this is not just a China phenomenon. In Thailand the flooding basically damaged certain customers and I think it's pretty well publicized that WD took a lot of damage from the flood, but beyond that there is a fairly large, there was a lot of supply base component supply base in Thailand that was also impacted. So that makes it a little harder to predict just how quickly this can come back. Obviously we can't give out any kind of single customer type information, but clearly the situation has done the floods have done a lot of damage and there is still flooding going on in Thailand, so this is not a case where everything can be determined quickly because in some cases some of the suppliers you can't get to their facilities and they're underwater or couple of feet underwater, so it's going to take some time to play this out but we're committed to provide people and anything else our customers need to help them with this and get the supply back up and running.

Operator: Bill Ong, Ticonderoga Securities.

Bill Ong - Ticonderoga Securities: So my questions are how Veeco deploys the MOCVD tools over the course of time so can you tell me for a given customer that owns a K465, a K465i and a MaxBright tool how do they deploy these tools with the given customers roadmap. So in other words of those semiconductors 02 is running 65 nanometer nodes neutral is running 0.2 nanometer nodes so can you give me a sense of how old and new tools are being deployed on your products?

John R. Peeler - CEO: Boy, it really depends on the customer situation and their strategy and their approach. So, it varies a lot and keep in mind that customers can take their 465 up and upgrade it to a 465i and that's been one of the real advantages of our product line is that we've been able to upgrade older equipment and bring it up to new standards. We expect to be doing some of that over the next year as we bring some of that along. But the fact is with the upgrades, you can get world-class performance out of anything that we've sold over the last three years or so. So, there's no reason to be sitting there with an old product. Now, some customers may not take advantage of the upgrades and they may use the old product in a application that doesn't require as much uniformity or things like that, but the ability is there to bring the equipment up to the state of the art.

Bill Ong - Ticonderoga Securities: So, what it means that even the 02s are still running steady on relative to that customer along side-by-side with MaxBright?

John R. Peeler - CEO: They can if the customer chooses to upgrade them, absolutely. We have a lot of customers that are buying 465i's. We've brought the – currently shipping 465i's, we brought them up to the same performance levels as MaxBright and there are customers that prefer single tools. We do not see this as moving all the MaxBright's. I think we're going to have a good balanced of single tools and cluster tools.

Operator: Olga Levinzon, Barclays Capital.

Olga Levinzon - Barclays Capital: I wanted to probe your guidance for the December quarter. Can you talk about what kind of mix it embeds in terms of data storage versus LED & Solar? Within the LED and solar aspect part of it, what percentage of that is MaxBright? You mentioned that it's close to 50% in the current quarter. I just want to get your thoughts and what the outlook is.

David D. Glass - EVP and CFO: We usually don't get as granular in our next quarter outlook in terms of which products are being sold. I guess I wouldn't want to comment at this point on what components is going to be MaxBright.

David D. Glass - EVP and CFO: I think there'll be a healthy mix of MaxBright and 465is, and I think you should expect to see that onward into 2012. So, it's not going to be radical shift there. Overall, mix is probably pretty similar to what it's been in the past. There are no huge shifts here.

Olga Levinzon - Barclays Capital: Within your revised new breakeven model, can you talk about at that $100 million per quarter level, what the implied gross margins are and how we should think about the mix between R&D and SG&A?

David D. Glass - EVP and CFO: Again, to get to that level implies a lot of decision making that we'd have to make, but we see margins even at the lower levels. With the operating model we have, margins should still be in the north of 40% range and you should expect to see that we would be a lot more cautious about taking R&D down and a disproportionate amount of the that reduction is going to come out of SG&A not R&D, again because a lot of it depends on how far out we see the downturn, but right now, we're looking at – this is not a protracted downturn and we wouldn't be aggressive about taking R&D cost down because the longer term future is still there.

Operator: Mark Heller, CLSA.

Mark Heller - CLSA: One, I know it's a bit far out, but can you ballpark MOCVD demand for 2012? I mean, is it going to be down 50%? And two, can you discuss your assumptions behind the 5,000 MOCVD unit number between 2011 and 2015? I mean, does that assume larger reactors size and larger wafer sizes?

John R. Peeler - CEO: So first of all on 2012 MOCVD demand, we haven't put out forecast. You can look at the analyst estimates and they range from 200 to 600 units. So, obviously, a wide variability in forecast and we will put out some more information as we get closer into 2012. The 5000 reactors is really in order to bring some sanity to that, it's 5465i equivalent reactor. So you could think of it as a standard reactor, something that we're shipping today and if we shipped a reactor at some point in the future that had twice the capacity, that would count as two equivalent reactors. Obviously if we shipped a reactor that has twice the capacity we would expect it to sell for more money, but it is an equivalent reactor, the analysis assumes penetration rates of lighting and yields improving from where they are in every region and of course they're quite different country to country, so it's not like they all move up uniformly, but each region goes up the learning curve improves its yield reduces costs and that also that future generation of equipment over this period lower the overall LED manufacturing costs and that spurs demand so it's based on a lot of information. We think the models held up pretty well over our last year plus since we developed it and hopefully that helps.

Mark Heller - CLSA: The number of engineers that you trained over 200 I think these are operators is that really the bottleneck or is the bottleneck process engineers or people that actually developed the LED recipes?

John R. Peeler - CEO: They are mostly operators, the bottleneck is both when you sell a lot of equipment into a region you need a lot of operators and you need a smaller number of very highly skilled process engineers that develop an LED stack and that sort of thing. Of course a small number of really highly skilled process engineers can support a large number of tools within a given customer. So, kind of different ratios and we expect to help on both sides of that front.

Operator: Satya Kumar, Credit Suisse.

Satya Kumar - Credit Suisse: I was wondering if you could give a little bit more color on the backlog cancellations in the quarter. Wondering if they're primarily from backlighting or general lighting and from which regions were they go primarily from?

David D. Glass - EVP and CFO: Backlighting, well, it was multiple regions. We're not going to comment country-by-country, but just thinking through I'd say it was Company's that fall in the category of – if you remember our pie charts where we identify our customers they fall into both categories, those that are producing just general lighting and those that are backlighting as well.

Satya Kumar - Credit Suisse: Related to the 50% to 70% utilization comment you made, I was wondering if you could give a flavor as to perhaps, if you could perhaps rank the regions in terms of where you see the highest utilization rates and where the reorder rate could be sooner versus where you might see lower utilization rates?

John R. Peeler - CEO: Probably Taiwan at the top and then onward to Korea and China, the big three as far as utilization. But I guess I would caution that it varies significantly customer-by-customer within these regions so not as simple on regional basis. Some customers are getting up there with where they have plans.

Operator: Daniel Amir, Lazard Capital Markets.

Daniel Amir - Lazard Capital Markets: A couple of questions here. First of all, can you breakdown or give us an idea whether contracts and maintaining tools in terms of servicing the tools over the life of the tool is that meaningful? Should we be looking at that at all, is something that could impact your model going forward? I had one follow-up.

John R. Peeler - CEO: We expect that our overall services and components aftermarket services to grow significantly in the coming year. It is meaningful and we generally provide a one year warranty on all of our equipment. So, the real range or the total available market that we go after for our equipment is delayed from shipments by about a year as the products come out of warranty, then we have an ability to serve them from a parts and additional services point of view. So, parts consumables and services, we do see it as a significant part of our business and growing substantially over the next year. So, it's a little different than some other industries in that, the LED business is still a pretty early stage business. There is a lot of secrecy. There is a lot of desire of customers to protect their IP and we have to respect that, and sometimes that puts a little bit of a damper on what kind of services you could provide that you might provide in a different industry, but it's a significant business for us and we're paying a lot of attention to it.

Daniel Amir - Lazard Capital Markets: Is there any way to look at what percentage of your businesses actually could come – percentage of tool would be the maintenance and services?

John R. Peeler - CEO: It's going to come up. It's going to increase over time in our data storage business, it's over 30% of the business is part services and consumables. I wouldn't have been expecting MOCVD to get there anytime soon and each year we move forward in these large shipments that we shipped in second half of 2009 and 2010 come out of warranty, the more basically market areas for us. So, it's going to get the double digits. It's been way less than double digits on MOCVD business this year. It's going to be double-digit percentages of the business next year and I think as we get into the year a little bit, we'll try to provide some more color, but it's still little early for us to do that.

David D. Glass - EVP and CFO: I didn't have the numbers at my finger tips, but the breakdown of inventory, of the $127 million in inventory, its $62.7 million raw materials, $28 million WIP and $36.8 million finished goods.

Operator: Andrew Huang, Sterne Agee.

Andrew Huang - Sterne Agee: Just one question going back to the breakeven analysis. When you said gross margins in the I guess north 40% at $100 million revenue a quarter, would R&D in dollars get done to around $20 million a quarter, I am just looking for a ballpark range?

David D. Glass - EVP and CFO: We wouldn't put a number out there that granular. Like I said before there's a lot of decisions that we would make on what we would pull back and so we've kind of not a granular level but at a total company high level said these are the things we would do so.

John R. Peeler - CEO: Andrew one of the things that would be involved in that would be kind of the length of the downturn whether we think the business is going to stay there for some extended period of time or whether it's going to pick back up that would shift our thinking on whether we should be reducing our R&D or not and so it's pretty I mean we can reduce it if we need to but our philosophy is to invest very heavily on R&D we think it served us extremely well over the last couple of years and we believe it will allow us to maintain our lead.

Andrew Huang - Sterne Agee: Just one follow-up, if you look back to Q1 of '09 which I think was the bottom of the last downturn there are quite a few chip makers that were actually taking tools apart and then using them for spare parts so I guess my question is have you seen any of that yet?

John R. Peeler - CEO: No we really haven't seen any of that and Q1 of 2009 was a pretty special time I don't mean special in a nice way, but there clearly were a lot of drastic measures I think though you could learn something from Q1 of '09 and that is by Q3 of '09 the market was roaring back and although the downturn went deep and actually that particular MOCVD downturn started in the summer before the Lehman bankruptcy and went through the second half of 2008. I mean, it wasn't drastic until of course Lehman filed for bankruptcy. So we were already seeing a downturn in the third quarter of 2008 and then – Q4 of 2008 was bad, Q1 of 2009 was bad and then in the middle of 2009 we booked our biggest order in history and had to go from figuring out how to build few units a quarter to how to scale on a real massive scale. So anyway I think it is a good indication of how things can shift so quickly. So with that thank you Andrew and thank you all for joining us tonight. Take care.

Operator: Ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation.