Good day everyone and welcome to the Axcelis first quarter of 2008 earnings release conference call. As a reminder, today’s call is being recorded. Later, we will conduct a question-an-answer session and instructions will follow at that time. For opening remarks and introductions, I would now like to turn the conference over to Mr. Steve Bassett. Please go ahead.

Good afternoon. This is Steve Bassett, Executive Vice President and Chief Financial Officer for Axcelis Technologies. Welcome to our conference call to discuss our results for the first quarter of 2008. If you have not received a copy of our press release issued earlier this afternoon, it is available on our web site. With me today are: Mary Puma, Chairman and Chief Executive Officer; and Matthew Flynn, our Executive Vice President of Customer Operations. After the prepared remarks, there will be time for questions. Play back service will be available on our website as described in the press release. Please note that comments made today about our expectations for future revenues, profits, and other results are forward-looking statements under the SEC Safe Harbor Provision. These forward-looking statements are based on management’s current expectations and are subject to risks inherent in our business. These risks are described in detail in our form 10K Annual Report, and other SEC filings which we urge you to review. Our actual results may differ materially from our current expectations. We do not assume any obligation to update these forward-looking statements. We reported a net loss for the first quarter of $11.1 million, or $.011 per share upon revenues of $84.9 million, which included approximately $10 million of Optima HD revenue. Gross margins, at 34.4% were in-line with our expectations. Margins are being impacted negatively by the low volume in system sales reflective of the soft market conditions, and by revenue recognized by new products. After-market business, which includes the sale of spare parts, product upgrades, and service labor, remained stable, generating revenues of approximately $41 million. Our after-market business continues to generate margins that are accretive to the business as a whole. New systems order were $29 million, down from $44 million in the previous…

Thank you, Steve. I would like to take a few minutes to share my views on current market conditions, and provide an update on our progress. I will also give a brief summary of the SHI proposal and our recent proxy vote. On our last call, we shared our outlook for this quarter with you, which reflected our expectations that market weakness would continue to adversely impact our results, putting both our new product penetration and our base business under continued pressure. In fact, market conditions and visibility in the first quarter not only remained challenging, but they have deteriorated further. This industry-wide market weakness has impacted our business as well as that of our customers and competitors. Many of our customers have delayed capital spending for semi-conductor equipment, and continue to push out major projects. The market will rebound and strengthen but the timing is unclear, particularly in light of broad uncertainty in the global economy. At this point, we expect continued weakness through the balance of 2008. It is undoubtedly a challenging time right now in the semi-conductor market. Turning to our Optima HD program, we continue to make good progress despite this very difficult environment. We won a new customer during the quarter, and shipped that customer a first tool. In addition, the production data that we are receiving from customers for the Optima HD remains positive. For example, at one large memory customer, the Optima HD continues to achieve consistently higher productivity in production than our competitor. This customer recently added a fifth Optima HD, bringing the number of Optima HD tools to nearly ½ of the total number of high-current tools in production in that FAB. Our market share in high-current was adversely impacted over the last few years by our late entry into the…

Your first question comes from Satya Kumar from Credit Suisse.

This is [inaudible] for Satya Kumar. Going back to the SHI offer, is there something holding back Axcelis from this, or is primarily a pricing issue?

I’ve already addressed this in my prepared remarks, and there is really nothing further for me to comment on in this matter. Do you have any other questions that relate to operations?

You talked about Optima XE. What gives you the confidence about this one? Are you able to maintain share in this in the high-energy space?

The Optima XE is our newest offering in the high-energy space. We have dominated the high-energy segment for a number of years, and the Optima XE is the single wafer evolution of that industry-leading RF Linac technology. We fully expect our competitive advantages to continue. The ease of transferability of customer’s production processes is a key feature, and we are engaged with a number of new and existing customers. We have shipped our first tool to a customer and we are very confident that we are going to continue to lead that market segment.

The next question comes from Jim Covello with Goldman Sachs. Jim Covello- Goldman Sachs & Company: Mary, just one quick question that you didn’t seem to anxious to chat about. Can you answer what valuation metric the board and you are using to think about the fairness of an offer?

As I have said, I have already said what I am going to say in my prepared remarks. At this point I am not going to respond to that question. Jim Covello- Goldman Sachs & Company: Can I ask why? What is wrong with us understanding which valuation metric you are using?

It’s not something I am going to discuss on this call. If you would like to call us back after the call we would be happy to chat with you further, although again that is something that we are not going to disclose. Jim Covello- Goldman Sachs & Company: On the operations of the business; obviously we are on a tough cycle and it is difficult to gain a share back in a cycle. What metrics and timelines are you setting to achieve those metrics to know that you are back on the right track? Obviously you believe you have the right technology. The market needs to adopt that technology in a big way. What timelines or metrics are you setting internally for the company to achieve those share gains in order for you to be happy with the progress the company is making?

I think if I put this into perspective, and we have talked about this before, we have recognized minimal 300 mill high-current revenues over the past several years, and in the first quarter of this year we recognized more 300 mill high-current revenue than we have over the last three years combined. So, I think it is fair to assume that this should result in increased high-current market share in 2008 which will translate into increased market share overall. What you need to remember, is that for every tool that we are selling, every Optima HD that we are selling, we are taking a spot away from out competitor.

Next we will hear from [inaudible].

I have a question about the mechanics of the resignation and possible re-admittance of the board members who were voted down. I note that Mr. Hardis is on the nominating committee. Is he going to decide whether he is going to be re-admitted or not, or has there been a change in the nominating committee?

No, he will not be part of the process as the nominating and governance committee deliberates on the offer of resignation.

There was only one other director on the nominating committee, has he been replaced, or is some other director taking that roll, or is it going to be a one-man committee?

Pat Nettles, who is the Chairman of the nominating and governance committee, will act on the offers of resignation.

By himself?

Yes, by himself.

The next question comes from Matt Petkun with D.A. Davidson and Company.

Mary, on the order book this quarter, can you share any news in terms of incremental HD orders, and are you seeing any activity on the Optima MD front?

Yes, on the Optima HD we talked about how we got two new orders. One from a new customer, the other was shipping a fifth tool to a customer that is already using the other four Optima HDs in production. On the Optima MD front we did receive a new design in order and we do continue to work to gain market share in that segment as well.

So that fifth tool for that customer was booked and shipped this quarter? I think that is what I wasn’t clear on.

It has been booked and shipped since our last call.

When you are looking at the remainder of this year, obviously the guidance for next quarter would imply using almost all the backlog. It is obviously tough to gauge how the end markets are going to trend, but can you talk about how backlog could trend through the course of this year?

Not specifically. We don’t have visibility that we are going to see any significant uptick in order activity. A vary large part of our business, and has been for a number of quarters, is turn business in which we get the order and we ship the system in the same quarter, so the backlog itself is less significant that perhaps it has been in the past, or what it is in times of upturn. I don’t know if that answered your question or not, you can come back with me with another question, but I don’t have any good indication of what the backlog will be throughout the rest of the year.

Steve, just one other question. In your guidance, what are the expectations from SEN, both from a royalty as well as an equity income perspective?

We are expecting from SEN $2 million. Probably 2/3 of that will be from royalties.

Maybe it is escaping me, but there is a $16 million increase on the investment on SEN, and on the balance sheet there obviously were not earnings from SEN to that extent. Where did that come from?

Translation. That is a translation gain, and the end strengthened fairly dramatically during the quarter.

The next question will be from Peter Kim with Deutsche Bank. Peter Kim- Deutsche Bank & Securities Inc.: First I wanted to ask about this $10 million in Optima revenue recognition. I thought you said last quarter that you were expecting to recognize about $12 million?

I was. We did have one tool that has moved into Q2. Peter Kim- Deutsche Bank & Securities, Inc.: Tell me how many tools this represented?

Four. Peter Kim- Deutsche Bank & Securities, Inc.: Do you have guidance for what you expect in terms of Optima revenue recognition for next quarter?

I expect that we will recognize two or three tools in Q2. Peter Kim- Deutsche Bank & Securities, Inc.: What was your quarter ending head count?

Quarter ending head count was 1,565. Peter Kim- Deutsche Bank & Securities, Inc.: Last quarter you said that you were expecting about a 7% head count reduction. That is only about 1%. I was wondering, what is the schedule for head count reduction?

I don’t think we said that. I don’t believe we said that we expected a 7% head count reduction. Peter Kim- Deutsche Bank & Securities, Inc.: What do you think, given the current outlook, is a reasonable operating model for the company? And do you have an idea about what you think is a break-even revenue level?

The break-even revenue level is dependant very much on gross margins. If we were in a normal position where our tools were mature, the revenue recognized from new products were from mature tools, I think we can generate at $90 million we can generate a margin in the low forties. Forty to forty one percent, which would give us a break-even somewhere around $90 million I think. Obviously our break-even levels are a little higher than that with the margins averaging in the 34-36% range. We are challenging costs and we are trying to drive as much cost as we can out of the business. We also have a product road map, a margin road map, to take costs out of the product, both from the design side and from the sourcing side. Peter Kim- Deutsche Bank & Securities, Inc.: Do you have a timeline for that?

Yes we do. We expect that early in 2009 we will be at where we want to be with respect to the product costs for the Optima HD, and that is the critical one. We also expect that the Optima HD, because of the way it has been designed, will actually end up having margins higher than what we have seen from our historical legacy products. Peter Kim- Deutsche Bank & Securities, Inc.: Lastly, what is your deferred revenue at this point?

$21 million.

The next question is a follow-up from Matt Petkun.

One other question, Steve, just on the profitability of SEN and your equity earnings there. Using historic royalty metrics and your guidance for next quarter, it would look like SEN would do sales in the high fifties. Historically when SEN has had those types of numbers, they have had equity income of almost $2 million. In this quarter it looks well under $1 million. What is going on from the profitability at SEN?

I think it would be SENs profitability level really is dependent on both product mix and customer mix. There is nothing significant that has changed at SEN, it is just that revenues are at a lower level and their gross margins will be affected by the product mix.

I just can’t find a quarter where they have had revenues even lower than that level, and they have had such a low contribution.

They have had some new product introductions in Japan also, which is impacting that. Which they haven’t had at that level for several years.

The next question will be from Patrick Ho with Stifel Nikolaus. Patrick Ho- Stifel Nikolaus & Company: Can you give guys an update in terms of the Optima XE and what you are seeing in the marketplace in terms of the transition from batch high-energy to single wafer high-energy?

Sure, we are seeing a transition to single wafer. The general trend over the long term has been for implant energies to come down as devices shrink, particularly in the logic segment. We have seen that accelerating a little bit recently. The thought is that as people move to single wafer high-energy they are seeing some benefits in terms of device counts per wafer, and in yield, and in fact it was reported recently that this is a real driver for this trend. The early work that was done had customers to prove that out was actually done on the Optima XE, so it is a market driver that we are well aware of and taking advantage of and we think that the Optima XE is well-positioned to do that. Longer term though we expect that the high-energy market is going to remain a significant segment of the implant business. There are a number of application drivers in flash, or image sensing, or imbedded in memory, SOC type devices where high-energy plays a significant role and will continue to do so. So even as it transitions to single wafer, we feel that the Optima XE will be a compelling product and we can build on the tradition we have of winning with the RF Linac technology.

And just to add to that, we are still obviously selling a significant number of our multi wafer high-energy tools. Customers are still buying those. The transition is happening, as Matt mentioned, but it is happening slowly over the course of the year. I want to make it clear that Axcelis is well prepared for this transition. Everybody questions it because of the fact that we were late to market with the Optima HD and so we had that miss in the high current market, but this is a very different situation for Axcelis and in terms of the actual speed with which the market will transition to single wafer in this segment. Patrick Ho- Stifel Nikolaus & Company: Can I characterize it as your initial customers for the XE will be the ones that you are trying to transition over from your batch customers right now over to the XE? Would that be a fair assessment?

It is a mix of both. If you look at what happened in high-energy market share last year, even though the market overall declined for a number of reasons, our share went up significantly. You can only conclude from that that our competitor is losing momentum and we are engaged with both existing and new high-energy customers now with the Optima XE.

And I think the important point is that we are not trying to transition any body. Customers have specific demands, and specific applications and needs, and requirements and as they require a single wafer tool we are working with them to transition to that, but as I mentioned before there will be a large number of customers that will continue to buy the multi wafer tool.

The next question will be a follow-up from Peter Kim with Deutsche Bank. Peter Kim- Deutsche Bank & Securities: With regards to the Imax, you have three Imax out there I believe. I was wondering, do you anticipate a significant increase in your percentage of market share in ultra-high dose this year? Or do you expect these Imax’s to maybe be recognized later on, maybe in 2009?

As you mentioned, we do have multiple tools in the field now that are being used in both the memory and logic space for a variety of different processes. I guess you could characterize that as the ultra-high dose. That is sort of the name that Dataquest has put on one particular application that the plasma merging tools are used for. We expect the Imax to have much broader adoption than that, and actually be part of the overall high current market as well. Peter Kim- Deutsche Bank & Securities: But you do anticipate recognizing several of these tools this year then? With regard to the royalty, does SEN offer a single wafer high-energy tool today?

No, they don’t. And Axcelis is working with customers in Japan to offer our Optima XE. Peter Kim- Deutsche Bank & Securities: So you don’t anticipate SEN offering a high-energy tool going forward? That was a pretty large market for them in the past, so I am kind of surprised to hear that.

We don’t expect them to offer a single wafer high-energy tool moving forward. Axcelis can meet that demand with our Optima XE.

We will hear another follow-up from Bill Nasgovitz with Heartland Funds.

Just candidly here, we are long-term investors, we have held this 3% position here in the company for about two years. We originally got in because we thought there was a turn and my partner made the decision, but just looking at your record, your record over the last eight years, we are going to lose money this year, we lost money in 2007, we lost money in 2005, we have lost money in 2003 and 2002, and 2001. For six out of eight years we are batting 250. Three out of four years we lose money. On top of that, over the past eight years Axcelis has spent close to $70 million a year on average, or over a half billion dollars, is that correct, $550 million on R&D, and we have a net loss. So why shouldn’t we sell this company? Why shouldn’t we take $6? We are burning capital. We have a negative return for eight years.

I appreciate your input. You have made the public statement now, the board is obviously going to hear this. We take all input from our shareholders and we pass it along to our board, so we appreciate that. If you are not happy with Axcelis’ performance, and I can honestly tell you that we are disappointed as well and we are very happy to turn that around. But again, we will pass that information along to the board, and you are going to have to make a decision about your future ownership of the stock.

Well, that is what we do. But it is just the logic. I would love to know your metrics as well, so we will call you separately and we would love to hear what your rationale is.

We will be happy to talk to you. We have spent quite a bit of time on the phone with Brad in the past, so we will be happy to do that. Thank you.

The next question is from CJ Muse with Lehman Bros.

I guess I was hoping to probe a little bit deeper on the high-energy side and considering that we have seen heightened pricing pressure there, and more D-rem oriented, what do you think that market size looks like here in 2008?

We did see a decline in that last year. And more than 2/3 of the drop happened in Japan, and it was a result we believe of buying patterns of some major memory suppliers there and a sum transition of lower energy well implants to medium-current tools. Interestingly enough, we benefitted from that particular trend as SEN gained market share in Japan in medium-current last year. The memory market dominates the high-energy purchasing, and so it is going to be lumpy and it is going to depend on how that market recovers. It is really hard to put a number on what the overall high-energy market is going to be this year, Like we said earlier, there are a number of key drivers that are not going to go away. It is going to remain a significant portion of the implant business going forward.

If I were to tell you that overall CapEx would be down say 25%, how would you think about it off of that number considering some transition to medium-current as well as the fact that you have more exposure to memory there. Does high-energy decline 30%, 35%? How should we think about that?

It is hard to predict what the memory market is going to do in the latter half of the year. It definitely is going to be linked to that. As far as the erosion to the medium-current, I think that is balanced with a lot of the things like flash memory and image sensor applications continue to grow in popularity, and like solid-state memory drives and notebooks for instance is going to drive a lot of flash consumption. I think that they can offset each other. So the high-energy market won’t be as stable, similar to the size it has been overall. Again, it is hard to predict what it is going to do relative to the other two segments, unless you know what the memory market is going to do. Sitting here today, I couldn’t tell you that.

When you look at the market, how do you think of the mix it will be between batch and single wafer in 2008? Will you see single wafer become a more meaningful percentage, or is that more of a 2009 event?

I actually agree with my competition on this one. It is going to take at least another year for the evaluations that are going on now to take hold, that multi wafer high-energy tools will continue to ship in volume this year and they will continue to be with us next year too.

The next question will be from Stella Young with Ramias.

Mary, I just wanted to address this question to you. We got the sense that one of the things that has been preventing discussions and sitting down with SHI has been a lack of trust between the parties, and perhaps rightfully so. It seems that perhaps there has been improvement on that front recently, and I wondered if you could comment on that, and if you think that there has been an incremental improvement in the level of trust between the parties, particularly from the perspective of the board, and your membership on the board?

I don’t really have anything to say regarding that point. I can’t comment on it.

On the level of trust?

Right.

Ok, then I echo those comments from Heartland. Thanks.

It does appear that we have no questions. This does conclude our conference call, and we do thank you for your participation on today’s conference. Have a great day.