MTSN Mattson Technology, Inc.

Mattson Technology, Inc. (the "Company" or "Mattson Technology") was incorporated in California in 1988 and reincorporated in Delaware in 1997. The Company designs, manufactures, markets and globally supports semiconductor wafer processing equipment used in the fabrication of integrated circuits.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by such accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of financial position and operations have been included. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Mattson Technology for the year ended December 31, 2010, which are included in the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission on March 11, 2011. Certain prior year amounts have been reclassified to conform to the current presentation.

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The results of operations for the three and nine months ended October 2, 2011 are not necessarily indicative of results that may be expected for the entire year ending December 31, 2011.

The Company's fiscal year ends on December 31. The Company closes its first fiscal quarter on the Sunday closest to March 31. The second and third fiscal quarters are each 13 weeks long and the fourth quarter closes on December 31.

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.

As of October 2, 2011, the Company had cash, cash equivalents and restricted cash of $38.1 million and working capital of $57.6 million. The Company believes that these balances will be sufficient to fund its working and other capital requirements over the course of the next twelve months. The Company's operations require careful management of its cash and working capital balances. The Company's liquidity is affected by many factors including, among others, fluctuations in its revenue, gross profits and operating expenses, as well as changes in its operating assets and liabilities. The cyclicality of the semiconductor industry makes it difficult to predict the Company's future liquidity needs with certainty. Any upturn in the semiconductor industry would result in short-term uses of cash to fund inventory purchases and accounts receivable. Alternatively, any renewed softening in the demand for the Company's products or ineffectiveness of its cost reduction efforts may cause the Company to incur additional losses in the future and lower its cash balances. The Company may need additional funds to support its working capital requirements, operating expenses or for other requirements. Historically, the Company has relied on a combination of fundraising from the sale and issuance of equity securities (such as its common stock offering in

5

May 2011) and cash generated from product, service and royalty revenues to provide funding for its operations. The Company will continue to review its expected cash requirements and take appropriate cost reduction measures to ensure that the Company has sufficient liquidity. The Company periodically reviews its liquidity position and may decide to raise additional funds, and may seek them from a combination of sources including issuance of equity or debt securities through public or private financings. These financing options may not be available on a timely basis, or on terms acceptable to the Company, and could be dilutive to our stockholders. If adequate funds are not available on acceptable terms, the Company's ability to achieve its intended long-term business objectives could be limited.

In October 2009, the Financial Accounting Standards Board ("FASB") issued an amendment to its previously released guidance related to revenue recognition for sales arrangements with multiple deliverables. The amended guidance requires an entity at the inception of an arrangement to allocate the arrangement's consideration to all of its deliverables using the relative selling price method, which allows for management's best estimate of a deliverable's selling price when vendor-specific or other third-party evidence of fair value are not available. The residual method of allocating consideration, required under previous guidance, is no longer permitted. Effective January 1, 2011, the Company adopted this guidance for revenue arrangements entered into or materially modified on or after that date. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements.

In May 2011, the FASB issued Accounting Standards Update ("ASU") 2011-04, an amendment to Accounting Standards Codification ("ASC") 820, Fair Value Measurements , providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the ASC 820 disclosure requirements, particularly for Level 3 fair value measurements. This amendment will be effective for the Company's fiscal year beginning January 1, 2012. The adoption of this amendment is not expected to have a material effect on the Company's consolidated financial statements, but may require certain additional disclosures.

In June 2011, the FASB issued ASU No. 2011-05, which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of stockholders' equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income that contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for the Company's fiscal year beginning January 1, 2012. The adoption of this update will not have an impact on the Company's consolidated financial position, results of operations or cash flows as it only requires a change in the format of the current presentation.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other - Testing Goodwill for Impairment to simplify goodwill impairment testing by permitting an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. ASU 2011-08 will be effective for the Company's fiscal year beginning January 1, 2012. The adoption of this update is not expected to have a material impact on the Company's financial position, since the Company currently has no goodwill recorded on its balance sheet.

There were no other recent accounting pronouncements or changes in accounting pronouncements during the nine months ended October 2, 2011, compared to the recent accounting pronouncements described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, that are of significance or potential significance to the Company.

6

2. Balance Sheet Details

The Company's cash and cash equivalents, short-term investments and restricted cash as of October 2, 2011 and December 31, 2010 are carried at fair market value, as shown below:

As of October 2, 2011 and December 31, 2010, the Company had restricted cash of $2.0 million and $4.0 million, respectively, which is securing standby letters of credit provided to certain landlords and vendors, as more fully described in Note 6.

The Company did not have any short-term investments as of October 2, 2011. All short-term investments as of December 31, 2010 were considered available-for-sale and were marked to market, with unrealized gains and losses recorded as a component of other comprehensive income. As of December 31, 2010, all short-term investments had contractual maturities due within one year.

Components of inventories as of October 2, 2011 and December 31, 2010 are shown below:

Amounts in the table above are presented net of inventory valuation charges for excess and/or obsolete inventories. Inventory valuation charges for the nine months ended October 2, 2011 and September 26, 2010, were $4.5 million and $0.8 million, respectively.

7

Components of property and equipment as of October 2, 2011 and December 31, 2010 are shown below:

Components of accrued liabilities as of October 2, 2011 and December 31, 2010 are shown below:

Components of other liabilities as of October 2, 2011 and December 31, 2010 are shown below:

8

3. Fair Value

The Company's cash and cash equivalents, short-term investments and restricted cash are carried at fair value, and its accounts receivable and accounts payable are valued at their carrying amounts which approximate fair value due to their short-term nature. The Company had no debt outstanding as of October 2, 2011.

Assets and liabilities measured at fair value on a recurring basis are shown in the table below by their corresponding balance sheet caption and consisted of the following types of instruments as of October 2, 2011 and December 31, 2010:

Equity instruments in the preceding table represent plan assets under the Company's Deferred Compensation Plan, which offset corresponding deferred compensation plan liabilities as of the dates presented.

The Company's identified intangible assets consisted of the following as of October 2, 2011 and December 31, 2010:

For the three months ended October 2, 2011 and September 26, 2010, the Company recorded amortization expense of approximately $0.1 million each period. For the nine months ended October 2, 2011 and September 26, 2010, the Company recorded amortization expense of approximately $0.2 million each period.

9

5. Restructuring Charges

In 2008 and 2009, the Company implemented several restructuring programs, resulting in restructuring charges principally comprised of employee severance costs and lease contract termination costs.

In connection with these earlier restructuring programs, during the first quarter of fiscal year 2011, the Company resolved its remaining employee severance contingencies and reduced the restructuring accrual by $0.1 million. During the third quarter of fiscal year 2011, the Company entered into a formal lease termination contract with a landlord for a facility it had previously exited as part of an earlier restructuring program. The Company increased its restructuring accrual by $0.2 million to account for additional lease termination costs and other costs necessary to close and consolidate this facility during the three and nine months ended October 2, 2011.

During the nine months ended October 2, 2011, the Company made payments of $0.1 million, reducing the related contract termination liabilities.

The following table summarizes changes in the restructuring accrual for the three and nine months ended October 2, 2011 and September 26, 2010:

The Company anticipates that the remaining lease contract termination payments will be paid in installments through December 2015.

10

6. Commitments and Contingencies

The following table summarizes changes in the product warranty accrual for the three and nine months ended October 2, 2011 and September 26, 2010:

In the ordinary course of business, the Company's bank provides standby letters of credit or other guarantee instruments on behalf of the Company to certain parties as required. The standby letters of credit are secured by certificates of deposit, which are classified as restricted cash in the accompanying condensed consolidated balance sheets. The Company has never recorded any liability in connection with these guarantee arrangements beyond what is required to appropriately account for the underlying transaction being guaranteed. The Company does not believe, based on historical experience and information currently available, that it is probable that any amounts will be required to be paid under such guarantee arrangements. As of October 2, 2011, the maximum potential amount that the Company could be required to pay was $1.8 million, the total amount of outstanding standby letters of credit, which were secured by $2.0 million of certificates of deposit.

In connection with the Company's acquisition of Vortek Industries, Ltd ("Vortek") in 2004, the Company became party to an agreement between Vortek and the Canadian Minister of Industry (the "Ministry") relating to an investment in Vortek by Technology Partnerships Canada. Under the agreement, as amended, the Company or Vortek (renamed Mattson Technology, Canada, Inc. or "MTC") agreed to various conditions, including (i) payment by the Company of a royalty to the Ministry of 1.4 percent of revenues from certain Flash RTP products, up to a total of CAD 14.3 million (approximately $13.6 million based on the applicable exchange rate as of October 2, 2011), (ii) MTC maintaining a specified average workforce of employees in Canada through October 27, 2009, (iii) investment of a certain amount by October 27, 2009 and (iv) certain other provisions concerning protection of intellectual property rights and other terms. The Company is no longer subject to the conditions under (ii) and (iii), as discussed above; but is still subject to the payment of royalties on revenues from the sale of Flash RTP products through 2020. If MTC is dissolved, files for bankruptcy, or MTC or the Company do not materially comply with certain material terms, covenants and conditions of the contract prior to its termination on December 31, 2020 or upon earlier payment of the maximum royalty obligations, the Company could be subject to liquidated damages in the amount of CAD 14.3 million less any royalties paid by MTC or the Company to the Ministry.

The Company is a party to various agreements, pursuant to which it may be obligated to indemnify other parties with respect to certain matters. Typically, these obligations arise in the context of contracts under which the Company may agree to hold other parties harmless against losses arising from a breach of representations or with respect to certain intellectual property, operations or tax-related matters. The Company's obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have defenses to asserted claims and/or recourse against third parties for payments made by the Company. It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company's obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material effect on the Company's financial position, results of operations or cash flows. The Company believes if it were to incur a loss in any of these matters, such loss would not have a material effect on its financial position, results of operations or cash flows.

11

In the ordinary course of business, the Company is subject to claims and litigation, including claims that it infringes third party patents, trademarks and other intellectual property rights. Although the Company believes that it is not reasonably possible that any current claims or actions will have a material adverse impact on its operating results or its financial position, given the uncertainty of litigation, the Company cannot be certain of this. The defense of claims or actions against the Company, even if not meritorious, could result in the expenditure of significant financial and managerial resources.

The Company records a legal liability when it believes it is both probable that a liability has been incurred, and the amount can be reasonably estimated. The Company monitors developments in its legal matters that could affect the estimate it has previously accrued. Significant judgment is required to determine both probability and the estimated amount.

On May 16, 2011, the Company completed a registered public offering of 7,820,000 newly issued shares of the Company's common stock. The common stock was issued at a price to the public of $1.80 per share. The Company received net proceeds of approximately $12.6 million from the offering after deducting underwriting discounts and estimated offering expenses of $1.4 million.

In March 2007, the Company's Board of Directors approved a common stock repurchase plan ("Repurchase Plan") that authorized the repurchase of up to $20.0 million of outstanding shares of the Company's common stock through open-market purchases or private transactions. In October 2007, the Company's Board of Directors expanded the Repurchase Plan, authorizing the repurchase of up to an additional $30.0 million of shares of the Company's common stock through open-market purchases or private transactions. By December 31, 2008, a total of 3.8 million shares had been repurchased against the original and expanded Repurchase Plan, at a weighted-average purchase price of $9.20 for a total purchase price of approximately $35.0 million. The Company's last repurchase of common stock under this plan was in the first quarter of 2008. On May 2, 2011, the Company terminated the Repurchase Plan.

12

Accumulated other comprehensive income as of October 2, 2011 and December 31, 2010 was $21.8 million and $20.2 million, respectively, comprised primarily of cumulative translation gains.

As of October 2, 2011, the Company had approximately 1.6 million shares available for future grants under the Company's 2005 Equity Incentive Plan (the "2005 Plan"). The following table summarizes the combined activity under all of the Company's equity incentive plans for the nine months ended October 2, 2011:

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

Stock options granted under the 2005 Plan are for periods not to exceed seven years. Generally, options to purchase stock under the 2005 Plan are granted at exercise prices that are at least 100 percent of the fair market value of the Company's common stock on the date of grant. Generally, 25 percent of the options vest on the first anniversary of the vesting commencement date, and the remaining options vest 1/36 per month for the next 36 months thereafter.

During the three months ended October 2, 2011 and September 26, 2010, the Company granted options to purchase 0.1 million and 0.7 million shares of common stock, respectively, with an estimated total grant-date fair value of $0.2 million and $1.3 million, respectively. During the nine months ended October 2, 2011 and September 26,

13

2010, the Company granted options to purchase 1.4 million and 2.0 million shares of common stock, respectively, with an estimated total grant-date fair value of $2.1 million and $4.0 million, respectively.

Supplemental disclosure information about the Company's stock options outstanding as of October 2, 2011:

The aggregate intrinsic value shown in the table above represents the total pretax intrinsic value, based on the Company's closing stock price of $1.17 as of September 30, 2011, which would have been received by the option holders had all option holders exercised their "in-the-money" options at that date. The Company settles employee exercises of options with newly issued shares of common stock.

The Company's 2005 Plan provides for grants of time-based and performance-based RSUs.

Generally, 25 percent of the time-based RSUs vest on each anniversary of the vesting commencement date or date of grant. On occasion, the Company grants time-based RSUs for varying purposes with different vesting schedules. Time-based RSUs granted under the 2005 Plan are counted against the total number of shares of common stock available for grant under the plan at 1.75 shares of common stock for every one share of common stock subject thereto.

During the three and nine months ended October 2, 2011, the Company did not grant any time-based RSUs. During the three months ended September 26, 2010, the Company also did not grant any time-based RSUs. During the nine months ended September 26, 2010, the Company granted 3,000 time-based RSUs, with an estimated total grant-date fair value of $12,000. The associated stock-based compensation expense on time-based RSUs is determined based on the fair value of the Company's common stock on the date of grant of the RSU and recognized over the vesting period.

The vesting of performance-based RSUs is contingent on the Company's achievement of certain predetermined financial goals and in some cases, the achievement of certain market performance. The amount of stock-based compensation expense recognized in any one period can vary based on the achievement or anticipated achievement of specific performance goals. If a performance goal is not met or is not expected to be met, no compensation cost is recognized on the underlying RSUs, and any previously recognized compensation expense on those RSUs would be reversed.

As of October 2, 2011, the Company had 0.3 million performance-based RSUs outstanding. These RSUs will expire during the first quarter of 2012, if the performance targets are not achieved by then. The Company did not record any compensation expense related to these performance-based RSUs during the three and nine months ended October 2, 2011 and September 26, 2010 since the Company has determined that due to market conditions it is not probable that any of the performance targets will be met.

14

9. Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the applicable authoritative guidance, which requires the measurement of stock-based compensation on the date of grant based on the fair value of the award, and the recognition of the expense over the requisite service period for the employee.

The Company uses the Black-Scholes valuation model to determine the fair value of stock options. The Black-Scholes model requires the input of subjective assumptions, which are summarized in the table below for the three and nine months ended October 2, 2011 and September 26, 2010:

The Company estimates the expected life of options based on an analysis of its historical experience of employee exercise and post-vesting termination behavior considered in relation to the contractual life of the option; expected volatility is based on the historical volatility of the Company's common stock; and the risk-free interest rate is equal to the U.S. Treasury rates, with maturity approximating the expected life of the option. The Company does not currently pay cash dividends on its common stock and does not anticipate doing so in the foreseeable future; accordingly, the expected dividend yield is 0 (zero) percent.

The Company's stock-based compensation expense for the three and nine months ended October 2, 2011 and September 26, 2010 was as follows:

The Company did not capitalize any stock-based compensation as inventory for the three and nine months ended October 2, 2011 and September 26, 2010 as such amounts were inconsequential.

As of October 2, 2011, the Company had $2.6 million in unrecognized stock-based compensation expense related to stock options, net of estimated forfeitures, which will be recognized over a weighted-average period of 2.7 years. As of October 2, 2011, the Company had approximately $40,000 in unrecognized stock-based compensation expense related to unvested time-based RSUs outstanding, net of estimated forfeitures, which will be recognized over a weighted-average period of 0.3 years.

15

10. Reportable Segments

The Company has one reportable segment - designing, manufacturing and marketing of advanced fabrication equipment to the semiconductor manufacturing industry. All Company revenues and profits are generated from the sales of systems and services in this business segment, whose chief operating decision maker is the Company's Chief Executive Officer.

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

In the three months ended October 2, 2011, three customers accounted for 34 percent, 18 percent and 12 percent of net sales, respectively. In the three months ended September 26, 2010, two customers accounted for 41 percent and 18 percent of net sales, respectively.

In the nine months ended October 2, 2011, two customers accounted for 38 percent and 10 percent of net sales, respectively. In the nine months ended September 26, 2010, two customers accounted for 47 percent and 15 percent of net sales, respectively.

As of October 2, 2011, three customers accounted for 21 percent, 19 percent and 17 percent of the Company's accounts receivable balance, respectively. As of December 31, 2010, four customers accounted for 19 percent, 13 percent, 11 percent and 11 percent of the Company's accounts receivable balance, respectively.

Geographical information relating to the Company's property and equipment, net, as of October 2, 2011 and December 31, 2010 is as follows:

On a quarterly basis, the Company evaluates its expected income tax expense or benefit based on its year-to-date operations, and records an adjustment in the current quarter. The net tax provision (benefit) is the result of the mix of profits earned by the Company and its subsidiaries in tax jurisdictions with a broad range of income tax rates. For the nine months ended October 2, 2011 and September 26, 2010, the Company recorded a $0.2 million and a $0.3 million provision for income taxes, respectively. The provision for income taxes primarily consists of provisions or benefits from foreign taxes. The $0.2 million tax expense for the nine months ended October 2, 2011 includes a $0.4 million tax benefit related to the release of uncertain tax benefits due to a lapse of the statute of limitations, offset by a tax provision of $0.6 million.

16

As of December 31, 2010, the Company had $27.1 million of unrecognized tax benefits exclusive of interest and penalties described below. Included in the $27.1 million are approximately $3.0 million of unrecognized tax benefits (net of federal benefit) that, if recognized, would favorably affect the effective tax rate in a future period, before consideration of changes in the valuation allowance. The Company believes that it is reasonably possible that there will be a decrease of $1.7 million in its unrecognized tax benefits exclusive of interest and penalties within the next twelve months.

The Company's practice is to recognize interest and/or penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2010, the Company had $1.2 million accrued for estimated interest and $0.1 million accrued for estimated penalties. For the nine months ended October 2, 2011, the recorded income tax provision included estimated interest of $0.2 million.

The Company and its subsidiaries are subject to United States federal income tax as well as to income taxes in various foreign and state jurisdictions. For federal and state income tax purposes, the statute of limitations are closed for all years prior to 2006 with the exception of 2004. The Company had no tax audits in progress as of October 2, 2011.

The Company presents both basic and diluted earnings per share on the face of its condensed consolidated statements of operations. Basic earnings per share are computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share are computed using the weighted-average number of shares of common stock outstanding plus the effect of all dilutive securities representing potential shares of common stock outstanding during the period. For the purposes of computing diluted earnings per share, weighted average common stock equivalents do not include stock options with an exercise price that exceeded the average market price of the Company's common stock for the period.

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

On May 16, 2011, the Company completed a registered public offering of 7,820,000 newly issued shares of the Company's common stock. These shares are included on a weighted-average basis for the three month and nine month periods ending October 2, 2011.

All outstanding stock options and restricted stock units are potentially dilutive securities, and as of October 2, 2011 and September 26, 2010, the combined total of stock options and RSUs outstanding were 7.2 million and 7.0 million, respectively. However, since the Company had net losses for the three and nine months ended October 2, 2011 and September 26, 2010, no potentially dilutive securities were included in the computation of diluted shares for those years as inclusion of such shares would have been anti-dilutive. Accordingly, basic and diluted net loss per share were the same in each period reported.

17

13. Comprehensive Loss

The components of comprehensive loss are:

18

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with the condensed consolidated financial statements and notes presented in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes in our last filed Annual Report on Form 10-K for the year ended December 31, 2010 (the "2010 Form 10-K").

We are a supplier of semiconductor wafer processing equipment used in the fabrication of integrated circuits ("ICs"). Our manufacturing equipment is used for semiconductor manufacturing and back-end packaging. Our manufacturing equipment utilizes innovative technology to deliver advanced processing capabilities and high productivity for the fabrication of current and next-generation ICs. We were incorporated in California in 1988 and reincorporated in Delaware in 1997.

In fiscal year 2011, our new positions in etch and rapid thermal processing ("RTP"), added to our broad strip base, expanded our available market, especially in the new "greenfield" sites, and is transitioning us from productivity-driven markets into more technology-driven markets. Our etch products, the paradigmE and Alpine, are targeted to meet the stringent requirements of advanced dielectric etch as well as packaging applications. Throughout 2011, we have benefited from our strategic investment in our etch product line by recording and shipping multiple paradigmE etch systems to a leading semiconductor manufacturer for volume manufacturing of advanced etch applications. In the third quarter of 2011, we launched the paradigmE Si for polysilicon etch applications. The introduction of this tool enables us to better serve the growing silicon etch market and significantly increase our total served available market. Our etch products now address over half of the applications in the total etch market. We have grown the etch business to over one-third of our total system revenue, as customers select our etch tools based on their process performance and cost of ownership.

During the third quarter of 2011, we strengthened our strip position by shipping tools to customers across foundry, logic and NAND. Our customers are using our SUPREMA strip system for both front-end-of-line and back-end-of-line applications, as the systems provide low cost of ownership, high productivity and technology extendibility. In RTP, we shipped volume levels of our Helios systems to a major NAND producer, a new position we gained during the last cycle. We also shipped the Helios XP to multiple foundry customers, with the first of these going into volume production.

19

Results of Operations

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

Net sales were $44.9 million for the three months ended October 2, 2011, an increase of approximately $5.2 million compared to $39.8 million for the three months ended September 26, 2010. The increase reflects continued purchases of our core products by our customers and the acceptance of the new etch position that we have entered.

Net sales were $143.3 million for the nine months ended October 2, 2011, an increase of approximately $46.2 million compared to $97.1 million for the three months ended September 26, 2010. The increase in net sales for the nine month period ending October 2, 2011 was primarily due to an increase in sales of our etch products, coupled with increases in our other core products.

20

Cost of sales was $28.3 million for the three months ended October 2, 2011, an increase of $3.0 million compared to $25.2 million for the three months ended September 26, 2010. The increase was primarily due to costs associated with increased product sales.

Cost of sales was $97.2 million for the nine months ended October 2, 2011, an increase of approximately $32.4 million compared to $64.9 million for the nine months ended September 26, 2010. The increase was primarily due to costs associated with increased product sales.

Gross profit for the three months ended October 2, 2011 was $16.7 million, an increase of $2.2 million, compared to $14.5 million for the three months ended September 26, 2010. The increase was primarily due to the increase in sales and improved utilization of our internal manufacturing operation.

Gross margin for the three months ended October 2, 2011 was approximately 37 percent, relatively flat as compared to the 37 percent gross margin for the three months ended September 26, 2010.

For the three months ended October 2, 2011 and September 26, 2010, we sold $2.4 million and $1.2 million of inventories, respectively, that were previously written-down as part of excess and obsolete inventory. The benefit derived from the sale of this inventory was partially offset by inventory valuation charges of $2.1 million and $0.3 million for the three months ended October 2, 2011 and September 26, 2010, respectively, for other inventory deemed to be excess and obsolete.

Gross profit for the nine months ended October 2, 2011 was $46.0 million, an increase of $13.8 million compared to $32.2 million for the nine months ended September 26, 2010. The increase was primarily due to the increase in sales.

Gross margin for the nine months ended October 2, 2011 was approximately 32 percent, a slight decrease from the 33 percent for the nine months ended September 26, 2010. The gross margin was unfavorably impacted in the nine month period ended October 2, 2011 as a result of $0.8 million in warranty cost overruns in servicing our new products.

For the nine months ended October 2, 2011 and September 26, 2010, we sold $5.9 million and $3.4 million of inventories, respectively, that were previously written-down as part of excess and obsolete inventory. The benefit derived from the sale of this inventory was partially offset by inventory valuation charges of $4.5 million and $0.8 million for the nine months ended October 2, 2011 and September 26, 2010, respectively, for other inventory deemed to be excess and obsolete.

Research, development and engineering expenses were $6.7 million for the three months ended October 2, 2011, a decrease of $0.2 million, compared to $6.9 million for the three months ended September 26, 2010. Spending levels remained relatively flat across expense categories.

Research, development and engineering expenses were $19.9 million for the nine months ended October 2, 2011, a decrease of $0.5 million, compared to $20.4 million for the nine months ended September 26, 2010. The decrease is due in part to a $0.5 million reduction in depreciation expense on lab tools resulting from significantly lower capital expenditures in 2009 through 2011, as compared to earlier years. Otherwise, spending levels remained relatively flat across the other expense categories.

21

Selling, general and administrative expenses were $12.4 million for the three months ended October 2, 2011, a decrease of $0.2 million, compared to $12.6 million for the three months ended September 26, 2010. The decrease is due in part to a decrease in our allowance for doubtful accounts as a result of collecting certain accounts receivable, from a gain on sale of property and equipment and through spending decreases in other selling, general and administrative categories, partially offset by a $0.8 million increase in salaries and other compensation.

Selling, general and administrative expenses were $37.8 million for the nine months ended October 2, 2011, an increase of $0.3 million, compared to $37.5 million for the nine months ended September 26, 2010. The year over year increase reflects the higher-level of revenues and related business activities in 2011, including a $1.8 million increase in salaries and other compensation, a $0.8 million increase in amortization expense for evaluation tools placed at customer sites in late 2010, and an increase to the allowance for doubtful accounts. This increase was partially offset by a $1.4 million allocation of field service costs to cost of sales as a result of higher utilization rates, and from lower costs associated with supporting our evaluation tools at customer sites due to our ability to convert certain of these tools into sales during the nine months ended October 2, 2011. Customs duties also significantly decreased in 2011, by $1.0 million, primarily related to payments related to a government review of our designated repair center in Korea in 2010.

Restructuring charges for the three months ended October 2, 2011 were $0.2 million, compared with a $13,000 restructuring charge for the three months ended September 26, 2010. The increase in the restructuring charge relates to an adjustment of an earlier estimate to terminate a lease contract for an excess building in our German manufacturing facility. The $0.2 million in costs includes a negotiated lease termination payout, along with estimated costs to close the facility.

Restructuring charges for the nine months ended October 2, 2011 were $0.1 million, compared with the $0.1 million benefit in restructuring charges for the three months ended September 26, 2010. The change is a result of an increase to the restructuring reserve in fiscal year 2011 for an adjustment of an earlier estimate to terminate a lease contract in Germany, and from a benefit recorded in fiscal year 2010 from the settlement of certain employee severance benefits.

We anticipate that the remaining lease contract termination payments will be paid in installments through December 2015.

Interest income (expense), net for the three and nine months ended October 2, 2011 and September 26, 2010 were nominal, reflecting the continuation of low interest rates.

Other income (expense), net was a $0.5 million income for the three months ended October 2, 2011, which primarily consisted of foreign exchange gains related to Euro-denominated intercompany payables at our U.S. operations during the period when the U.S. dollar strengthened 9 percent against the Euro. Other income (expense), net was $1.4 million expense for the three months ended September 26, 2010, which included $1.0 million of foreign exchange losses primarily attributed to Euro-denominated liabilities as the Euro strengthened approximately 8 percent against the U.S. dollar during the period.

Other income (expense), net was a $1.9 million expense for the nine months ended October 2, 2011, which primarily consisted of foreign exchange losses related to Euro-denominated intercompany payables at our U.S. operations during the period when the U.S. dollar fluctuated against the Euro. Other income (expense), net was $0.5 million income for the nine months ended September 26, 2010, which included $0.2 million of foreign exchange gains primarily attributed to Euro-denominated liabilities as the Euro weakened approximately 7 percent against the U.S. dollar during the period.

22

On a quarterly basis, we evaluate our expected income tax expense or benefit based on our year-to-date operations, and we record an adjustment in the current quarter.

The provision for income taxes was $0.2 million and $0.1 million for the three months ended October 2, 2011 and September 26, 2010, respectively, primarily related to foreign taxes. The net tax provision is the result of the mix of profits earned by us, and our subsidiaries, in tax jurisdictions with a broad range of income tax rates.

The provision for income taxes was $0.2 million and $0.3 million for the nine months ended October 2, 2011 and September 26, 2010, respectively, primarily related to foreign taxes. The $0.2 million tax provision for the nine months ended October 2, 2011 includes a $0.4 million tax benefit related to the release of uncertain tax benefits due to a lapse of the statute of limitations, offset by a tax provision of $0.6 million as a result of the mix of profits earned by us and our subsidiaries in tax jurisdictions with a broad range of income tax rates.

Management's Discussion and Analysis of Financial Condition and Results of Operations discuss our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, we evaluate our estimates and judgments, including those related to reserves for excess and obsolete inventory, warranty obligations, bad debts, intangible assets, income taxes, restructuring costs, contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. These form the basis for making 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.

Consistent with our 2010 Form 10-K, we consider certain accounting policies for the following areas as critical to our business operations and an understanding of our results of operations:

• Revenue Recognition
• Allowance for Doubtful Accounts
• Warranty
• Inventories and Inventory Valuation
• Fair Value Measurement of Assets and Liabilities
• Impairment of Long-Lived Assets
• Restructuring
• Income Taxes
• Stock-based Compensation

In the first quarter of 2011, we adopted guidance related to revenue recognition for sales arrangements with multiple deliverables. The impact of this adoption on our revenue recognition policy is described in further detail in our first quarter of 2011 quarterly report on Form 10-Q, within the Recent Accounting Pronouncements and Accounting Changes section. There have been no other material changes from the methodology applied by management for critical accounting estimates previously disclosed in our 2010 Form 10-K.

23

Liquidity and Capital Resources

Our cash, cash equivalents and restricted cash was $38.1 million as of October 2, 2011, an increase of $15.0 million from $23.0 million as of December 31, 2010. We had restricted cash of $2.0 million as of October 2, 2011, which primarily secures letters of credit provided to certain landlords and vendors. Stockholders' equity as of October 2, 2011 was $65.0 million compared to $62.7 million as of December 31, 2010. Working capital as of October 2, 2011 was $57.6 million compared to $51.1 million as of December 31, 2010.

We have incurred operating losses and generated negative cash flows for the last three years. Our operations require careful management of our cash and working capital balances. Our liquidity is affected by many factors including, among others, fluctuations in our revenue, gross profits and operating expenses, as well as changes in our operating assets and liabilities. The cyclicality of the semiconductor industry makes it difficult for us to predict our future liquidity needs with certainty. Any upturn in the semiconductor industry would result in short-term uses of our cash to fund inventory purchases and accounts receivable. Alternatively, any renewed softening in the demand for our products or ineffectiveness of our cost reduction efforts may cause us to incur additional losses in the future and lower our cash balances.

We may need additional funds to support our working capital requirements, operating expenses or for other requirements. Historically, we have relied on a combination of fundraising from the sale and issuance of equity securities (such as our common stock offering in May 2011) and cash generated from product, service and royalty revenues to provide funding for our operations. We intend to continue to review our expected cash requirements and take appropriate cost reduction measures to ensure that we have sufficient liquidity. We periodically review our liquidity position and may seek to raise additional funds from a combination of sources including issuance of equity or debt securities through public or private financings. In the event additional needs for cash arise, we may also seek to raise these funds externally through other means, such as the sale of assets. The availability of additional financing will depend on a variety of factors, including among others, market conditions, the general availability of credit to the financial services industry and our credit ratings. As a consequence, these financing options may not be available to us on a timely basis, or on terms acceptable to us, and could be dilutive to our stockholders. Our current liquidity position may result in risks and uncertainties affecting our operations and financial position, including the following: we may be required to reduce planned expenditures or investments; we may be unable to compete in our newer or developing markets; we may not be able to obtain and maintain normal terms with suppliers; suppliers may require standby letters of credit before delivering goods and services, which will result in additional demands on our cash; customers may delay or discontinue entering into contracts with us; and our ability to retain management and other key individuals may be negatively affected. Failure to generate sufficient cash flows from operations, raise additional capital or reduce spending could have a material adverse effect on our ability to achieve our intended long-term business objectives.

As of October 2, 2011, we did not have any significant "off-balance sheet" arrangements, as defined in Item 303 (a)(4)(ii) of Regulation S-K.

Under accounting principles generally accepted in the United States of America, certain obligations and commitments are not required to be included in our consolidated balance sheets. These obligations and commitments, while entered into in the normal course of business, may have a material impact on our liquidity. For further discussion of our contractual obligations, see our 2010 Form 10-K.

Net cash provided by operations of $0.7 million for the nine months ended October 2, 2011 consisted primarily of a net loss of $13.8 million offset by $8.9 million of non-cash charges and $5.7 million of cash flow increases reflected in the net change in assets and liabilities. Non-cash charges consisted primarily of $7.1 million of depreciation and amortization and $1.9 million of stock-based compensation. Cash flow increases resulting from the net change in assets

24

and liabilities primarily consisted of a $9.4 million decrease in accounts receivable, a $4.5 million increase in accrued liabilities, partially offset by a $4.5 million decrease in accounts payable, a $3.3 million increase in inventories for fourth quarter tool builds and a $0.6 million decrease in income taxes payable.

Net cash used in operations of $13.9 million for the nine months ended September 26, 2010 was primarily comprised of a net loss of $25.5 million, partially offset by non-cash charges of $8.5 million and $3.2 million of cash increases reflected in the net change in assets and liabilities. Non-cash charges consisted primarily of $7.1 million of depreciation and amortization and $2.0 million of stock-based compensation, partially offset by $0.7 million released from the allowance for doubtful accounts upon realization of certain customer accounts previously provided for during the industry downturn. Cash flow increases resulting from the net change in assets and liabilities primarily consisted of a $7.8 million increase in accounts payable, a $3.3 million increase in deferred revenue and a $0.8 million decrease in other assets. Cash flow decreases resulting from the net change in assets and liabilities primarily consisted of a $3.3 million increase in accounts receivable, a $3.1 million increase in inventories and a $2.2 million increase in advance billings. The increases in accounts receivable and accounts payable reflect the sharp increase in sales and business activities in the first three quarters of 2010. The increases in advance billings and deferred revenue were due to an increase in systems shipped during the first three quarters of 2010 for which revenue was deferred as of September 26, 2010, in accordance with the authoritative guidance for revenue recognition.

We expect that cash provided by or used in operating activities may fluctuate in future periods as a result of a number of factors including fluctuations in our net sales and operating results, amount of revenue deferred, inventory purchases, collection of accounts receivable and timing of payments.

Net cash provided by investing activities of $4.2 million for the nine months ended October 2, 2011 consisted primarily of $2.2 million of proceeds from maturities of available-for-sale investments, a $2.0 million decrease in restricted cash balances used to secure standby letters of credit provided to certain landlords and vendors, and $0.8 million in proceeds from the sale of property and equipment, partially offset by $0.8 million of capital spending.

Net cash provided by investing activities was $3.7 million for the nine months ended September 26, 2010, primarily consisting of proceeds of $6.4 million from maturities of available-for-sale investments in excess of purchases, partially offset by a $2.0 million increase in restricted cash requirements and capital spending of $0.8 million.

Net cash provided by financing activities of $12.7 million for the nine months ended October 2, 2011 consisted primarily of $12.6 million of proceeds from our public offering on May 16, 2011 of 7,820,000 shares of our common stock at a price to the public of $1.80 per share of common stock. The $12.6 million of proceeds is net of underwriting discounts and offering expenses of $1.5 million. The net proceeds from this offering are being used for general corporate purposes, including working capital.

Cash flows related to financing activities for the nine months ended September 26, 2010 were not material.

See note 1, Basis of Presentation , of Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and impacts on our results of operations, financial position, and cash flows.

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of October 2, 2011, our $17.0 million investment portfolio consisted entirely of highly liquid money market funds, which we classify as cash equivalents. Based on the short-term nature of cash equivalents, we believe we currently have only nominal risk of fluctuations in interest rates. Historically, we have also invested in marketable securities with maturity dates within one year from date of purchase, which have a greater exposure to potential losses arising from changes in interest rates.

Our investment objective is to achieve the maximum return compatible with capital preservation and our liquidity requirements. Our strategy is to invest our cash in a manner that preserves capital, maintains sufficient liquidity to meet our cash requirements and maximizes yields consistent with approved credit risks. We place our investments with high credit quality issuers and, by policy, limit the amount of our credit exposure to any one issuer. Our portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity. We consider investments in instruments purchased with an original maturity of 90 days or less to be cash equivalents and we classify our short- term investments as available-for-sale.

Our cash equivalents and short-term investment portfolios strategy is to invest primarily in money market funds, commercial paper, corporate debt securities, and U.S. government and government-sponsored debt securities. Our short-term investments are reported at fair value with unrealized gains and losses, net of tax, included in accumulated other comprehensive income within stockholders' equity in the condensed consolidated balance sheets. The amortization of premiums and discounts on the investments, realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are included in other income (expense), net in the condensed consolidated statements of operations.

The functional currency of our foreign subsidiaries is their local currencies. Accordingly, all assets and liabilities of these foreign operations are translated using exchange rates in effect at the end of the period, and revenues and costs are translated using average exchange rates for the period. Gains or losses from translation of foreign operations where the local currencies are the functional currency are included as a component of accumulated other comprehensive income. Foreign currency transaction gains and losses are recognized in the condensed consolidated statements of operations as they are incurred. Because much of our revenues and capital spending are transacted in U.S. dollars, we are subject to fluctuations in foreign currency exchange rates that could have a material adverse affect on our overall financial position, results of operations or cash flows, depending on the strength of the U.S. dollar relative to the currencies of other countries in which we operate. Exchange rate fluctuations of greater than ten percent, primarily for the U.S. dollar relative to the Euro or the Canadian dollar, could have a material impact on our financial statements.

During the first two quarters of 2011, the U.S dollar weakened 9 percent relative to the Euro, before recovering in the third quarter of 2011. As a result, we realized foreign currency exchange losses of $1.4 million for the nine months ended October 2, 2011, primarily related to liabilities denominated in Euros at our U.S. operations during the period. Cumulative translation adjustment gains of $1.5 million, included in comprehensive loss for the nine months ended October 2, 2011, were primarily due to net assets denominated in Euros at our foreign operations, which resulted in an increase in cumulative translation adjustments to $21.8 million as of October 2, 2011, compared to $20.3 million as of December 31, 2010.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the quarterly period covered by this report. Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as the principal executive and financial officers, respectively, to allow timely decisions regarding required disclosures. Based on that evaluation,

26

our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during the third quarter of 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our management concluded that there was no such change during the quarter.

In the ordinary course of business, we are subject to claims and litigation, including claims that we infringe third party patents, trademarks and other intellectual property rights. Although we believe that it is unlikely that any current claims or actions will have a material adverse impact on our operating results or our financial position, given the uncertainty of litigation, we cannot be certain. Moreover, the defense of claims or actions against us, even if not meritorious, could result in the expenditure of significant financial and managerial resources.

Our involvement in any patent dispute, other intellectual property dispute or action to protect trade secrets and know-how could result in a material adverse effect on our business. Adverse determinations in current litigation or any other litigation in which we may become involved could subject us to significant liabilities to third parties, require us to grant licenses to or seek licenses from third parties and prevent us from manufacturing and selling our products. Any of these situations could have a material adverse effect on our business.

Because of the following factors, as well as other variables affecting our operating results, cash flows and financial condition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in the future periods. Other events that we do not currently anticipate or that we currently deem immaterial also may affect our results of operations, cash flows and financial condition.

We have incurred operating losses and generated negative cash flows for the last three years. As of October 2, 2011, we had cash, cash equivalents and restricted cash of $38.1 million and working capital of $57.6 million. Our operations require careful management of our cash and working capital balances. Our liquidity is affected by many factors including, among others, fluctuations in our revenue, gross profits and operating expenses, as well as changes in our operating assets and liabilities. The cyclicality of the semiconductor industry makes it difficult for us to predict our future liquidity needs with certainty. Any upturn in the semiconductor industry would result in short-term uses of our cash to fund inventory purchases and accounts receivable. Alternatively, any renewed softening in the demand for our products or ineffectiveness of our cost reduction efforts may cause us to incur additional losses in the future and lower our cash balances.

We may need additional funds to support our working capital requirements, operating expenses or for other requirements. Historically, we have relied on a combination of fundraising from the sale and issuance of equity securities (such as our common stock offering in May 2011) and cash generated from product, service and royalty revenues to provide funding for our operations. We periodically review our liquidity position and may seek to raise additional funds from a combination of sources including issuance of equity or debt securities through public or private

27

financings. In the event additional needs for cash arise, we may also seek to raise these funds externally through other means, such as the sale of assets. The availability of additional financing will depend on a variety of factors, including among others, market conditions, the general availability of credit to the financial services industry and our credit ratings. As a consequence, these financing options may not be available to us on a timely basis, or on terms acceptable to us, and could be dilutive to our stockholders. Our current liquidity position may result in risks and uncertainties affecting our operations and financial position, including the following:

Failure to generate sufficient cash flows from operations, raise additional capital or reduce spending could have a material adverse effect on our ability to achieve our intended long-term business objectives.

We derive most of our revenues from the sale of systems to a relatively small number of customers, which makes our relationship with each customer critical to our business. For example, in the nine month period ended October 2, 2011, and the years ended December 31, 2010, 2009 and 2008, our three largest customers accounted for a total of 58 percent, 59 percent, 55 percent and 39 percent of our revenues, respectively. We currently depend on one customer for a significant portion of our revenues, and the loss of, or a significant reduction in, orders from this customer would significantly reduce our revenue and adversely impact our operating results. Because semiconductor manufacturers must make a substantial investment to install and integrate capital equipment into a semiconductor fabrication facility, these manufacturers will tend to choose semiconductor equipment manufacturers based on established relationships, product compatibility and proven performance. Customer order cancellations could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, changes in forecasts or the timing of orders from customers could expose us to the risks of inventory shortages or excess inventory. This in turn could cause our operating results to fluctuate. If customer relationships are disrupted for inability to deliver sufficient products or for any other reason, it could have a significant negative impact on our business.

A large percentage of our sales are concentrated among customers in the memory market, representing 60 percent and 54 percent of systems sales in the years ended December 31, 2010 and 2009, respectively. As a result, a downturn or an upturn in memory spending could impact us more than it would impact competitors who are more diversified with logic and foundry customers.

Once a semiconductor manufacturer selects a particular vendor's capital equipment, the manufacturer generally relies upon equipment from this "vendor of choice" ("VOC") for the specific production line application. In addition, the semiconductor manufacturer frequently will attempt to consolidate other capital equipment requirements with the same vendors. Accordingly, we may face narrow windows of opportunity to be selected as the VOC by significant new customers. It may be difficult for us to sell to a particular customer for a significant period of time once that customer selects a competitor's product. If we are unable to achieve broader market acceptance of our systems and technology, we may be unable to maintain and grow our business and our operating results and financial condition will be adversely affected.

Although we maintain a backlog of customer orders with expected shipment dates within the next 12 months, customers may request cancellations or delivery delays. Customers in some regions place orders a few weeks before the shipment. As a result, our backlog may not be a reliable indication of future revenues. If shipments of orders in backlog are cancelled or delayed, revenues could fall below our expectations and the expectations of market analysts and investors.

28