MTSN Mattson Technology, Inc.

Through strategic investments in the etch market and continued focus on the dry strip and RTP markets, we are now in an arena with a predicted total available market (TAM) of $5.3 billion in 2011, based on market research data obtained from Gartner ⁽¹⁾ , a market research firm. In 2011, our new positions in etch and foundry RTP, added to our broad strip base, expanded our available market, and we have transitioned from productivity-driven into more technology-driven markets. Our etch products target the stringent requirements of advanced dielectric and silicon etch, as well as packaging applications. In 2011, we launched the paradigmE Si for silicon etch applications, and we now serve the growing silicon etch market. Our etch applications portfolio has helped our etch business grow and now contributes to over one-third of our total system revenue, as customers select our etch tools based on their process performance and cost of ownership.

Our customer base includes foundries, memory and logic device manufacturers. We have a global sales and support organization focused on developing strong, long-term customer relationships. We have design and manufacturing centers in the United States, Germany and South Korea. Our customer sales and support teams are located in China, Germany, Japan, South Korea, Singapore, Taiwan and the United States.

We were incorporated in California in 1988 and reincorporated in Delaware in 1997. Our principal executive office is located at 47131 Bayside Parkway, Fremont, CA 94538. Our telephone number is (510) 657-5900. Additional information about us is available on our website at http://www.mattson.com. The information on our website is not incorporated herein by reference.

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(1) Forecast: Semiconductor Manufacturing Equipment, Worldwide, 4Q11 Update Report issued in December 2011.

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The manufacture of ICs is a highly complex process with hundreds of individual processing steps, many of which are performed multiple times before manufacturing is complete and the IC is fully functional. To build an IC, transistors are first created on the surface of the silicon wafer, and then the transistors are microscopically wired together by means of interconnect metal layers. The steps require the wafer to be subjected to a tightly controlled series of chemical, thermal and photolithographic processes, resulting in the formation of millions, and in some cases billions, of transistors per IC and thousands of ICs on a single wafer.

Over the last four decades, the semiconductor industry has been able to uphold Moore's Law, which postulates that the number of transistors on a chip doubles approximately every 18 to 24 months. The process of reducing feature sizes will continue as the demand for smaller and faster electronic devices increases. Producing smaller features cost-effectively, while avoiding functional restrictions, requires the introduction and use of new materials and technologies. Industry transitions to larger wafer diameters are designed to enable more efficient production and higher yield, with the industry currently manufacturing its latest devices on 300 millimeter (mm) wafers, which it transitioned to during the last decade. The industry is now preparing for the transition to 450 mm wafers, and in 2011, several of the industry's largest companies announced 450 mm programs. Consortiums such as IMEC and ISMI have well-established programs focused on the challenges posed by manufacturing with 450 mm wafers, and in September 2011, the Global 450 Consortium was formed at the University of Albany's College of Nanoscale Science and Engineering to deploy 450 mm wafer tools and process capabilities. The 450 mm transition should enable the Moore's law curve development roadmap, a potential 30 percent lower die cost advantage and more efficient manufacturing tool platforms.

These developments increase manufacturing complexity and create the need for manufacturing equipment with more precise process control capability, increased reliability, low defect rates and high productivity. The increased difficulty of achieving transistor performance at advanced nodes has made high yields important in selecting process equipment. Semiconductor manufacturers demand systems that can achieve consistent, reliable and repeatable process results within critical tolerance limits while still achieving desired throughput rates.

As computing and communications become ubiquitous, we are entering the fifth major technology cycle of the past half-century, the Mobile Internet Computing Era, where people, devices, and vehicles are connected at all times and Internet access capability is being embedded in billions of wireless devices such as PDAs, cellular phones, and computers embedded in vehicles (e.g. navigational systems in cars). The content on the Internet continues to grow at an astounding pace. By extending the Internet through mobile information access, the Mobile Internet is on a trajectory to offer all of the same features and value propositions as the traditional Internet, with the potential of greater information access opportunities and broader device-spanning Internet services and experiences, as a result of continuous availability and location awareness. Today's mobile market is an era of 'convergence', gradually integrating computer, telecommunications, home appliances and broadcasting.

Mobile Internet usage is also ramping up faster than desktop Internet usage with smartphone and tablet devices leading this trend with billions of applications downloaded by consumers. Helping to drive this increase is improved wireless 3G and 4G technology and cloud computing.

This trend toward increased mobile Internet usage places demands on cloud computing or "virtual" networks that deliver convenient, on-demand common business applications and hosted services over the Internet to meet consumers' computing needs. Cloud computing services have shown significant growth, with innovations making business and consumer applications even more mobile and collaborative. Applications in smartphones and tablet PCs are expected to continue to drive increased mobile DRAM demand in the coming years.

The Mobile Internet Era shifts the fundamental IC demand from the PC era. In the PC era, the logic processor demand was driven by the complex instruction set computer (CISC) microprocessor while the mobility products are served better with the reduced instruction set computer (RISC) microprocessor which allows for the lower power and streamlined operating system required to deliver the long battery life and fast application switching on today's mobile products. At the memory level, the mobility era requires NAND for long-term file storage, compared with the DRAM-based short-term memory required on a PC. Combining the computing power with wireless capability

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and touch-screen interfaces adds additional chipsets that are more reliant on semiconductor foundry manufacturing. The industry still expects that PC Internet connectivity will continue to grow from today's levels and that the mobility era chip requirements will incrementally increase demand, place more emphasis on the foundry manufacturers and require a further NAND capacity expansion.

We have prepared for this shift, with concerted efforts to build upon our existing dry strip positions in NAND flash and foundry, by expanding our etch and RTP products into these NAND flash and foundry customer accounts. During 2011, we established new product positions at several NAND flash and foundry customers. The successful transition of these product positions to high-volume production is expected to help drive incremental revenue gains for us as the Mobile Internet Era unfolds.

Our business objective is to grow to a sustainable critical mass. Scale is required to deliver full support to the global semiconductor industry while maintaining development for Moore's Law and wafer size transitions. We expanded our served available market and are committed to:

• driving share gains in each of our existing market sectors; and
• leveraging our current technology capabilities to expand into new market sectors.

Our core competency is the ability to deliver leading-edge technical wafer processing at leading productivity levels to provide our customers with the most cost-effective manufacturing. Our tools are selected at the leading technology areas and in full production at advanced semiconductor manufacturing, including DRAM and NAND flash memory, logic and foundry sectors.

Semiconductor manufacturers demand processes that deliver results with an unprecedented level of precision. We work closely with our customers, supply chain vendors and technology partners to deliver on these demands. An important element of our growth strategy is our commitment to technology leadership in the markets we serve. We plan to extend our market and technology leadership by developing robust processing solutions that provide semiconductor manufacturers with technology, productivity and total cost of ownership advantages. Investments in research and development have enabled us to make process improvements and product innovations that we believe are ahead of current device requirements. We believe that our focus on delivering advanced technologies and increasing customer value will enable us to increase our competitive advantage, expand our share in existing markets and penetrate new markets.

The manufacturing of an IC consists of building approximately 30 layers of alternating conducting and insulating films on a silicon substrate wafer. Each layer is patterned according to the chip design. Photoresist stripping, or simply "resist stripping", is the removal of the photoresist masking layers from the wafer once the patterning process has been completed at each of the 30 layers. The objective is to eliminate the photoresist material from the wafer as quickly as possible, without allowing any surface materials to become etched. The need for dry strip across the entire wafer process requires a supplier to deliver very high-throughput, low-cost systems while delivering a strong technical solution. The 2011 dry strip market size was approximately $220 million according to Gartner in its December 2011 market research report.

We are a leader in the dry strip market. Our SUPREMA strip system utilizes an innovative wafer handling architecture to deliver productivity and reliability with exceptionally low cost of ownership for manufacturing at the 65 nanometer (nm) node and below. The SUPREMA features our patented Faraday-Shielded inductively coupled plasma (ICP) technology that offers superior resist strip capability to leading edge memory, logic and foundry customers. The SUPREMA has been installed at many of the global semiconductor companies for production and process development at advanced nodes.

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Rapid thermal processing (RTP) refers to a semiconductor manufacturing process that heats silicon wafers to high temperatures (up to 1200°C or greater) using high intensity lamps on a timescale of several seconds or less to set the electrical properties of the semiconductor and anneal any material defects. RTP consists of heating a single wafer at a time in order to affect its electrical properties. The single-wafer approach allows for faster wafer processing with shorter annealing times from less than one second to three minutes, and more precise control of the annealing profile and process parameters on the wafer. The RTP market that we serve was estimated to be $494 million in 2011, based on Gartner's market research report issued in December 2011.

As feature sizes become smaller and wafer uniformity demands become more stringent, there is an increased demand from rapid thermal equipment manufacturers to improve control, uniformity and repeatability of processes on wafers. Our RTP products feature dual-sided, lamp-based heating technology that provides enhanced process uniformity and repeatability with precise process control for chip manufacturing. Our products include the Helios and Helios XP systems for conventional annealing applications and the Millios system for millisecond anneal applications (MSA).

Our Helios and Helios XP systems are in volume production at major memory customer sites. The strategy to expand beyond the memory market progressed further in 2011 with the Helios XP. While extending the capabilities in the DRAM and NAND memory segment, the Helios XP system's temperature control architecture specifically aims at addressing advanced logic processing requirements, through its differentiated capabilities, including its low-temperature capability for advanced nickel silicide (NiSi) formation and high temperature pattern independent processing. In 2011, three major logic and foundry customers purchased and accepted the Helios XP evaluation systems. Two of the customers are transferring the system into current production while a third customer accepted the system as `process tool of record' for the advanced 20 nm technology node and is slating pilot production starting in 2012. A follow on order was shipped into a customer's second production site and is expected to generate revenue in 2012.

Millios, which features a patented arc lamp technology capable of greatly reducing thermal cycle time, is designed to enable our customers to meet advanced gate anneal and activation process requirements at the 32 nm technology node and beyond. This type of annealing, MSA, is needed in a few key processes in most advanced technology nodes where the high temperature exposure requires less than one of a half second. The capability to control anneal times in the millisecond time regime, has enabled one leading logic customer to significantly improve transistor performance in the 20 nm technology node. In 2011, our Millios tool was sold to a leading logic customer's research facility as one of the development systems to enable advanced process technologies. The Millios is valued as the enabling technology to advance 20 nm transistor performance of major logic manufacturers.

Etching is the process of removing any deposited materials or layers from the wafer's surface to create the desired pattern on the wafer's surface. Plasma etching is one type of dry etching, using plasma to produce chemically reactive species from various gases. The reactive gases are exposed to the wafer surface and react with the material to be etched. Our etch products feature a proprietary Faraday-shielded ICP combined with selectable etch bias control to provide excellent process on-wafer performance. Our etch products, the paradigmE and Alpine, are built on our high-throughput platform to provide low cost-of-ownership. The etch market size was approximately $4.6 billion in 2011 according to Gartner in its market research report issued in December 2011, of which we currently serve an estimated $1.7 billion of the market.

In 2011, we entered the year with the paradigmE solidly established in the DRAM market and expanded into the NAND flash and logic/foundry market. We shipped paradigmE for dielectric and silicon etch applications to major DRAM and NAND flash fabs, where they are in volume production. In addition, at the close of 2011, our paradigmE was selected for applications in complementary metal-oxide semiconductor (CMOS) Imaging Sensor manufacturing. This is part of our long-term vision to aggressively expand the served available market for our etch products. In 2012, we expect to further broaden our application and customer base in the etch market.

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Research, Development and Engineering

The semiconductor equipment industry is characterized by rapid technological change and product innovation. To be successful and competitive we continuously and aggressively develop more advanced process and process integration solutions for our customers. The products that we develop and market allow our customers to address their advanced requirements. Only by continuously striving to develop new intellectual property (IP) for processes and hardware can we maintain and advance our competitive position in the markets we serve. Accordingly, we devote a significant portion of our resources to research, development and engineering programs. We seek to maintain close relationships with our global customers and to remain responsive to their product and processing needs.

Our achievements in research, development and engineering in 2011 were in the following:

In plasma etch, we introduced the paradigmE 300 mm reactive ion etch (RIE) for advanced silicon etch applications. During the year, we worked to extend the features and capabilities of our etch offering and expand the system's etch applications portfolio to include a new set of processes. The tool is now established at foundry and logic customers and is in volume production at major DRAM and NAND flash fabs. In addition, the paradigmE is enabling development and manufacturing of next generation CMOS Imaging Sensor manufacturing.

We continued to extend the capability of our latest-generation RTP tools for 3X and 2X nm technology requirements and improved our tool reliability and productivity to help reduce our customers' cost of ownership. For Helios XP, we successfully engineered capabilities for more precise temperature measurement, as well as for low temperature processing. We have also developed and introduced the Differential Energy Control (DEC) capability to specifically address the pattern loading effect for pattern independent processing, an increasing problem below 40 nm logic processing. These innovative engineering improvements enable the formation of silicides and ultra-shallow junction (USJ) for the most advanced devices. In 2011, the Helios XP completed qualification for 20 nm node at advanced research and development facilities of our memory and foundry customers.

In 2011, we continued to work closely with a leading device manufacturer to demonstrate Millios' process and manufacturing advantages. Based on the system's proven high throughput, stability and reliability, this customer has qualified the Millios for its volume production facilities. In addition, a major foundry is now using the Millios system for its 20 nm logic process development. We are working with several other key customers to enable advanced process solutions, such as high-k metal gate (HKMG) transistors and precise NiSi formation.

Our SUPREMA strip system incorporates our ICP photoresist process module and an innovative vacuum-based, high-productivity platform that we expect will set new standards for technology and cost of ownership in the industry. Our Faraday-Shielded ICP source technology coupled with the advanced vacuum-based platform is becoming a requirement for processing of sub 30 nm devices. In response to the industry's continued demand for higher productivity, we continued to improve the throughput of our SUPREMA during the year.

In 2012, we intend to continue to make investments in strategic development and engineering programs to meet our customers' technical and production requirements. Over the next year, we intend to focus our research,

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development and engineering efforts on improving existing system capabilities, developing new advanced strip, RTP and etch processes for smaller feature sizes, as well as continued development and commercialization of new products in etch and millisecond anneal.

We maintain applications development and engineering laboratories in California, Canada, and Germany to address new tool and process development activities and customer specific requirements. Our research, development and engineering expenses were $26.2 million in 2011, $27.8 million in 2010 and $25.3 million in 2009, representing as a percentage of net sales 14 percent, 20 percent and 59 percent, respectively .

We rely on a combination of patent, copyright, trademark and trade secret laws, non-disclosure agreements and other IP protection methods to protect our proprietary technology. We hold a number of U.S. patents and corresponding foreign patents, and have a number of patent applications pending covering various aspects of our products and processes. We also have licensed a small number of patents and where appropriate, we intend to file additional patent applications on inventions resulting from our ongoing research, development and engineering activities to grow and strengthen all of our individual product IP portfolios.

As is customary in our industry, from time to time we receive or make inquiries regarding possible infringement of patents or other IP rights. Although there are no pending claims against us regarding infringement of any existing patents or other IP rights or any unresolved notices that we are infringing IP rights of others, such infringement claims could be asserted against us, or our suppliers, by third parties in the future. Any claims, with or without merit, could be time-consuming, result in costly litigation, result in loss or cancellation of customer orders, cause product shipment delays, subject us to significant liabilities to third parties, require us to enter into royalty or licensing agreements or prevent us from manufacturing and selling our products. If our products were found to infringe a third party's proprietary rights, we could be required to enter into royalty or licensing agreements in order to continue to sell our products. Royalty or licensing agreements, if required, may not be available on terms acceptable to us, if at all, which could seriously harm our business. Our involvement in any patent or other IP dispute or action to protect trade secrets and know-how could have a material adverse effect on our business.

The global semiconductor equipment industry is intensely competitive and is characterized by rapid technological change and demanding customer service requirements. Our ability to compete depends upon our ability to continually improve products, processes and services, and our ability to develop new products that meet constantly evolving customer requirements.

Substantial capital investments are required by semiconductor manufacturers to install and integrate new processing equipment into a semiconductor production line. As a result, once a semiconductor manufacturer has selected a particular supplier's products, the manufacturer often relies upon that equipment for the specific production line application, and frequently will attempt to consolidate its other capital equipment requirements with the same supplier. Accordingly, it is difficult for a competitor to sell to a customer for a significant period of time in the event a customer has selected our product. It may also be difficult to replace an existing relationship that a potential customer has with a competitor.

Each of our product lines competes in markets defined by the particular IC fabrication process it performs. In each of these markets, we have multiple competitors. At present, however, no single competitor competes with us in all of the process areas in which we serve. Competitors in a given technology tend to have different degrees of market presence in the various regional geographic markets. Competition is based on many factors, primarily technological innovation; productivity; total cost of ownership of the systems, including yield, price, product performance and throughput capability; quality; contamination control; reliability and customer support. We believe that our competitive position in each of our markets is based on the ability of our products and services to address customer requirements related to these competitive factors.

Our principal competitors in the dry strip market include Axcelis Technologies, Novellus Systems and PSK. Principal competitors for our thermal annealing systems are Applied Materials, Dainippon Screen Manufacturing and Ultratech. Principal competitors for our etch systems include Applied Materials, Lam Research and Tokyo Electron.

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Customers

The composition of our largest customers has varied from year to year. The following table shows our net sales from customers representing more than ten percent of total sales in each of the last three years and net sales from our top ten customers as a group for each of those years:

Our sales and marketing efforts are focused on building long-term relationships with our customers. We sell our systems primarily through our direct sales force and distribution agreements in certain regions and countries. Our sales and marketing personnel work closely with our customers to develop solutions to meet their processing needs. In addition to the direct sales force residing in our Fremont, California headquarters, we have sales and support offices in China, Germany, Japan, Singapore, South Korea, Taiwan and the United States.

In 2011, we maintained a few representatives where it was advantageous economically or geographically. We maintained our relationship with Canon Marketing, Japan for the distribution and support of our products in Japan.

International sales accounted for 94 percent of our net sales in 2011, 95 percent of our net sales in 2010 and 92 percent of our net sales in 2009. We anticipate that international sales will continue to account for a significant portion of our future net sales. Asia has been a particularly important region for our business. Our sales to customers located in Asia accounted for 84 percent of our net sales in 2011, 90 percent of our net sales in 2010 and 82 percent of our net sales in 2009. Our foreign sales are subject to certain governmental restrictions, including the Export Administration Act and the regulations promulgated under this Act.

One of our primary goals is to build strong and productive partnerships with our customers. Our customer support organization is headquartered in Fremont, California, with additional resources located in China, Germany, Singapore, South Korea, Taiwan and the United States. We also maintain a relationship with Canon Marketing, Japan for the distribution and support of our products in Japan. Our global support infrastructure is composed of a network of product and process technologists, along with experienced field service teams with diverse technical backgrounds in mechanical and electronics engineering. After-sales support is an essential part of our customer service program, and our international customer support teams provide the following services: system installation, on-site repair, telephone support, used tool refurbishment, relocation services, process development applications and upgrades for extending the useful life and value of our products.

We offer warranties on all of our products. We maintain spare parts depots, consignment locations at customer sites and local support in most regions. As part of our global support services, we also offer a broad selection of technical training courses, from maintenance and service training to basic and advanced applications and operation. We are also actively engaged in joint development programs at many major customer sites to collaborate on product and process development and increase the level of customer support.

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Backlog

We schedule production of our systems based on both backlog and regular sales forecasts. For several of our key customers, we typically receive orders several weeks prior to shipment. We include in backlog only those systems for which we have accepted purchase orders and assigned shipment dates within the next 12 months. Orders may be subject to cancellation or delay by the customer with limited or no penalty. Our backlog was $27.1 million as of December 31, 2011, $22.2 million as of December 31, 2010 and $4.3 million as of December 31, 2009. Because of possible future changes in delivery schedules and cancellations of orders, our backlog at any particular date is not necessarily representative of actual sales to be expected for any succeeding period. During periods of industry downturn, we have experienced cancellations, delays and push-outs of orders that were previously included in backlog.

We have direct manufacturing operations in the United States, Germany and South Korea. Our direct manufacturing operations consist of procurement, assembly, test, quality assurance and/or manufacturing engineering. We also utilize an outsourcing strategy for the manufacture of components and major subassemblies/modules. Our direct manufacturing teams are an integral part of our new product development process, working closely with our engineering teams to ensure that new products meet design-for-manufacturability, cost and quality targets. We have established sales and operations planning processes and systems to flexibly manage our production capacity and inventory levels, to quickly respond to fluctuating market demands.

As of December 31, 2011, we had 382 employees. The success of our future operations will depend in large part on our ability to recruit and retain qualified employees, particularly those highly-skilled design, process and test engineers involved in the manufacture of existing systems and the development of new systems and processes. None of our employees outside of Germany is represented by a labor union, and we have never experienced a work stoppage, slowdown or strike. In Germany, our employees are represented by workers' councils.

We are subject to international, federal, state and local environmental laws, rules and regulations. These laws, rules and regulations govern the transport, receipt, storage, use, treatment, discharge and disposal of hazardous and non-hazardous chemicals and wastes during manufacturing, research and development and sales demonstrations. Neither compliance with international, federal, state and local provisions regulating discharge of materials into the environment, nor remedial agreements or other actions relating to the environment have had, or is expected to have, a material effect on our capital expenditures, financial condition, results of operations or competitive position. However, if we fail to comply with applicable regulations, we could be subject to substantial liability for cleanup efforts, personal injuries, fines or suspension or cessation of our operations.

The Gartner Report(s) described herein, (the "Gartner Report(s)") represent(s) data, research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. (Gartner), and are not representations of fact. Each Gartner Report speaks as of its original publication date and the opinions expressed in the Gartner Report(s) are subject to change without notice.

We make available free of charge, through our website, http://www.mattson.com, our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (SEC). Our publicly filed information is also available on the SEC's website, http://www.sec.gov. The information on our website is not incorporated herein by reference.

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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. See also "Forward-Looking Statements" elsewhere in this report.

We have incurred operating losses and generated negative cash flows for the last four years. As of December 31, 2011, we had cash, cash equivalents and restricted cash of $32.9 million and working capital of $56.2 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, with longer-term uses for research and development or otherwise to make investments in our business. 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 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 years ended December 31, 2011, 2010 and 2009, our three largest customers accounted for a total of 60 percent, 59 percent and 55 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. See "Business—Customers" for a detailed description of our customer

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concentration. 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 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 due to an 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. 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.

The semiconductor equipment industry is both highly competitive and subject to rapid technological change. Significant competitive factors include the following:

Competitive pressure has been increasing in several areas. In addition to increased price competition, customers are waiting to make purchase commitments based on their end-user demand, which are then placed with requests for rapid delivery dates and increased product support. Some of our major competitors are larger than we are, have greater capital resources and may have a competitive advantage over us by virtue of having:

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Growth in the semiconductor equipment industry is increasingly concentrated in the largest companies, resulting in increasing industry consolidation, such as the pending merger of Lam Research and Novellus Systems announced in December 2011. Semiconductor companies are consolidating their vendor base and prefer to purchase from vendors with a strong, worldwide support infrastructure.

In addition, to expand our sales we must often displace the systems of our competitors or sell new systems to customers of our competitors. Our competitors may develop new or enhanced competitive products that offer price or performance features that are superior to our systems. Our competitors may also be able to respond more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the development, promotion, sale and on-site customer support of their product lines. We may not be able to maintain or expand our sales if competition increases and we are unable to respond effectively.

The semiconductor equipment industry is highly cyclical and periodically has severe and prolonged downturns, which causes our operating results to fluctuate significantly. We are exposed to the risks associated with industry overcapacity, including decreased demand for our products and increased price competition.

The semiconductor industry has historically experienced periodic downturns due to general economic changes or due to capacity growth temporarily exceeding growth in demand for semiconductor devices. Our business depends, in significant part, upon capital expenditures by manufacturers of semiconductor devices, including manufacturers that open new or expand existing facilities. Periods of overcapacity and reductions in capital expenditures by our customers cause decreases in demand for our products. This could result in significant under-utilization in our factories. If existing customer fabrication facilities are not expanded and new facilities are not built, we may be unable to generate significant new orders and sales for our systems. During periods of declining demand for semiconductor manufacturing equipment, our customers typically reduce purchases, delay delivery of ordered products and/or cancel orders, resulting in reduced revenues and backlog, delays in revenue recognition and excess inventory for us. Increased price competition may also result as we compete for the smaller demand in the market, causing pressure on our gross margin and net income.

The recessionary conditions of 2008 and 2009 in the global economy and the slowdown in the semiconductor industry impacted customer demand for our products and correspondingly, negatively impacted our financial performance. There remains high unemployment in developed countries, concerns regarding the availability of credit, uncertainty about a sustained economic recovery in the U.S. and fears of further economic deterioration in Europe and the developing world, which in turn, may lead to a global downturn. Any of these factors could have a negative impact on our business, or our financial condition.

Demand for semiconductor equipment depends on consumer spending. Continued economic uncertainty may lead to a decrease in consumer spending and may cause certain of our customers to cancel or delay orders. In addition, if our customers have difficulties in obtaining capital or financing, this could result in lower sales. Customers with liquidity issues could lead to charges to our bad debt expense, if we are unable to collect accounts receivables. These conditions could also affect our key suppliers, which could affect their ability to supply parts to us, and result in delays of the completion of our systems and the shipment of these systems to our customers.

Because of the economic downturn and the uncertainty of a full recovery, we may have to take further actions to reduce costs, which could reduce our ability to invest in research and development at levels we believe are desirable. If we are unable to effectively align our cost structure with prevailing market conditions, we will experience additional losses and additional reductions in our cash and cash equivalents. If we are not able to suitably adapt to these economic conditions in a timely manner or at all, our performance, cash flows, results of operations and ability to access capital could be materially and adversely impacted.

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We must continually anticipate technology trends, improve our existing products and develop new products in order to be competitive. The development of new or enhanced products involves significant risks, additional costs and delays in revenue recognition. Technical and manufacturing difficulties experienced in the introduction of new products could be costly and could adversely affect our customer relationships.

The markets in which our customers and we compete are characterized by rapidly changing technology, evolving industry standards and continuous improvements in products and services. Consequently, our success depends upon our ability to anticipate future technology trends and customer needs, to develop new systems and processes that meet industry standards and customer requirements and that compete effectively on the basis of price and performance.

Our development of new products involves significant risk, since the products are very complex and the development cycle is long and expensive. The success of any new system we develop and introduce is dependent on a number of factors, including our ability to correctly predict customer requirements for new processes, to assess and select the potential technologies for research and development and to timely complete new system designs that are acceptable to the market. We may make substantial investments in new technologies before we can know whether they are technically or commercially feasible or advantageous, and without any assurance that revenue from future products or product enhancements will be sufficient to recover the associated development costs. Not all development activities result in commercially viable products. We may not be able to improve our existing systems or develop new technologies or systems in a timely manner. We may exceed the budgeted cost of reaching our research, development and engineering objectives, and planned product development schedules may require extension. Any delays or additional development costs could have a material adverse effect on our business and results of operations.

Our products are complex, and we may experience technical or manufacturing inefficiencies, delays or difficulties in the prototype introduction of new systems and enhancements, or in achieving volume production of new systems or enhancements that meet customer requirements. Our inability, or the inability of our outsourced partners, to overcome such difficulties, to meet the technical specifications of any new systems or enhancements or to manufacture and ship these systems or enhancements in volume and in a timely manner would materially adversely affect our business and results of operations, as well as our customer relationships.

Our revenue recognition policies require that during the initial evaluation phase of a new product, customer acceptance needs to be obtained before we can recognize revenue on the product. Customer acceptances may not be completed in a timely manner for a variety of reasons, whether or not related to the quality and performance of our products. Any delays in customer acceptance may result in revenue recognition delays and have an adverse impact on our results of operations.

We may from time to time incur unanticipated costs to ensure the functionality and reliability of our products early in their life cycles, and such costs can be substantial. If we encounter reliability or quality problems with our new products or enhancements, we could face a number of difficulties, including reduced orders, higher manufacturing costs, delays in collection of accounts receivable and additional service and warranty expenses, all of which could materially adversely affect our business and results of operations. The costs associated with our warranties may be significant, and in the event our projections and estimates of these costs are inaccurate, our financial performance could be seriously harmed. In addition, if we experience product failures at an unexpectedly high level, our reputation in the marketplace could be damaged, and our business would suffer.

Sales of our systems depend upon the decision of a prospective customer to increase or replace manufacturing capacity, typically involving a significant capital commitment. Accordingly, the decision to purchase our systems requires time-consuming internal procedures associated with the evaluation, testing, implementation and introduction of new technologies into our customers' manufacturing facilities. Even after the customer determines that our systems meet their qualification criteria, we may experience delays finalizing system sales while the customer obtains approval for the purchase, constructs new facilities or expands its existing facilities. Consequently, the time between our first contact with a customer regarding a specific potential purchase and the customer's placing its first order may last from nine to twelve months or longer. We may incur significant sales and marketing expenses during this evaluation period. In addition, the length of this period makes it difficult to accurately forecast future sales. Also, any unexpected delays in orders could impact our revenue and operating results. If sales forecasted from a specific customer are not realized, we

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may experience an unplanned shortfall in revenues, and our quarterly and annual revenue and operating results may fluctuate significantly from period to period.

Our quarterly and annual revenue and operating results have varied significantly in the past and are likely to vary significantly in the future, which makes it difficult for us to predict our future operating results. We incurred significant net losses between 2001 and 2003, yet were profitable for each of the years 2004 to 2007. Again, we incurred net losses between 2008 and 2011, due to declining demand as a result of the weakness in the semiconductor equipment market and the global economy. We may not achieve profitability in future years. We will need to generate significant sales to achieve profitability, and we may not be able to do so. A substantial percentage of our operating expenses are fixed in the short term and we may continue to be unable to adjust spending to compensate for shortfalls in revenues. As a result, we may continue to incur losses, which could cause the price of our common stock to decline further or remain at a low level for an extended period of time.

International sales accounted for 94 percent, 95 percent and 92 percent of our net sales for the years ended December 31, 2011, 2010 and 2009, respectively. We anticipate international sales will continue to account for the vast majority of our future net sales. Asia has been a particularly important region for our business, and we anticipate that it will continue to be important going forward. Our sales to customers located in Asia accounted for 84 percent, 90 percent and 82 percent of our net sales for the years ended December 31, 2011, 2010 and 2009, respectively. Because of our continuing dependence upon international sales, we are subject to a number of risks associated with international business activities, including:

• natural disasters, acts of war, terrorism, widespread illness or other catastrophes affecting foreign countries.

Our sales to date have been denominated primarily in U.S. dollars; however future sales to Asian customers may be denominated in the customer's local currency. Our sales in foreign currencies are subject to risks of currency fluctuation. For U.S. dollar sales in foreign countries, our products may become less price competitive when the local currency is declining in value compared to the dollar. This could cause us to lose sales or force us to lower our prices, which would reduce our gross margins.

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We are exposed to various risks relating to compliance with the regulatory environment, including export control laws and material contracts provisions, and non-compliance or non-performance with any of these items could result in adverse consequences and monetary fines or damages.

We are subject to various risks related to (1) disagreements and disputes between national and regional regulatory agencies related to international trade; (2) new, inconsistent and conflicting rules by regulatory agencies in the countries in which we operate; and (3) interpretation and application of different laws and regulations. If we are found by a court or regulatory agency to not be in compliance with the laws and regulations, our business, financial condition and results of operations could be adversely affected.

As an exporter, we must comply with various laws and regulations relating to the export of products and technology from the U.S. and other countries having jurisdiction over our operations. In the U.S. these laws include the International Traffic in Arms Regulations ("ITAR") administered by the State Department's Directorate of Defense Trade Controls, the Export Administration Regulations ("EAR") administered by the Bureau of Industry and Security ("BIS"), and trade sanctions against embargoed countries and destinations administered by the U.S. Department of Treasury, Office of Foreign Assets Control ("OFAC"). The EAR governs products, parts, technology and software which present military or weapons proliferation concerns, so-called "dual use" items, and ITAR governs military items listed on the United States Munitions List. Prior to shipping certain items, we must obtain an export license or verify that license exemptions are available. In addition, we must comply with certain requirements related to documentation, record keeping, plant visits and hiring of foreign nationals. Any failures to comply with these laws and regulations could result in fines, adverse publicity and restrictions on our ability to export our products, and repeat failures could carry more significant penalties. In 2008, we self-disclosed to BIS certain inadvertent EAR violations, and are currently working with BIS to resolve these. As of December 31, 2011, we have accrued an amount to reflect what management believes to be the minimum estimated liability. We are unable to estimate the extent of any higher fines or penalties or other potential losses that may be incurred with respect to this matter, though we could face substantial civil fines or other penalties, which could have a material adverse effect on us.

We are a party to several governmental and private-party contracts that provide for liquidated damages in the event that we fail to comply with the covenants or requirements under any of these contracts. These liquidated damage payments could be significant and we could incur significant legal fees if we were to renegotiate these contracts. Any such damage amounts or legal expenses may adversely impact our financial condition or results of operations.

Our growth will depend on our ability to attract and retain qualified, experienced employees. Our ability to attract employees may be harmed by our recent financial losses, which has impacted our available cash and our ability to provide performance-based annual cash incentives. Also, part of our total compensation program includes share-based compensation. Share-based compensation is an important tool in attracting and retaining employees in our industry. If the market price of our common shares declines or remains low, it may adversely affect our ability to attract or retain employees.

During periods of growth in the semiconductor industry, there is substantial competition for experienced engineering, technical, financial, sales and marketing personnel in our industry. In particular, we must attract and retain highly skilled design and process engineers. If we are unable to retain existing key personnel, or attract and retain additional qualified personnel, we may from time to time experience inadequate levels of staffing to develop and market our products and perform services for our customers. As a result, our growth could be limited, we could fail to meet our delivery commitments or we could experience deterioration in service levels or decreases in customer satisfaction.

The market price of our common stock has been highly volatile in the past, and our stock price may decline in the future. For example, for the year ended December 31, 2011, the closing price range for our common stock was between $1.00 and $2.87 per share.

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The relatively low stock price makes us attractive to hedge funds and other short-term investors. This could result in substantial volatility of the stock price and cause fluctuations in trading volumes for our stock. In addition, in recent years the stock market in general, and the market for shares of high technology stocks in particular, have experienced extreme price fluctuations. These fluctuations have frequently been unrelated to the operating performance of the affected companies. In the past, securities class action litigation has often been instituted against a company following periods of volatility in its stock price. This type of litigation, if filed against us, could result in substantial costs and divert our management's attention and resources.

Our stock price has been below the five-year peak of $11.76 for several years, and if revenue does not return to the peak 2007 levels or we do not return to profitability in the near term, we could be an attractive target for acquisition or be impacted by mergers or acquisition by another company or consolidation in the industry. An acquisition or merger could be hostile or on terms unfavorable to us, and may result in substantial costs and potential disruption to our business.

We are subject to significant risks related to our operations .

We have outsourced our spare parts logistics functions and select core product manufacturing to third- party service providers. Outsourcing has a number of risks and reduces our control over the performance of the outsourced functions. Significant performance problems by these third-party service providers could result in cost overruns, delayed deliveries, shortages, quality issues or other problems that could result in significant customer dissatisfaction and could materially and adversely affect our business, financial condition and results of operations. If for any reason one or more of these third-party service providers becomes unable or unwilling to continue to provide services of acceptable quality, at acceptable costs and in a timely manner, our ability to deliver our products or spare parts to our customers could be severely impaired.

We rely, to a substantial extent, on outside vendors to provide many of the components and subassemblies of our systems. We obtain some of these components and subassemblies from a sole source or a limited group of suppliers. We generally acquire these components on a purchase order basis and not under long-term supply contracts. Because of this reliance on these vendors and suppliers, we may be unable to obtain an adequate supply of required components. When demand for semiconductor equipment is strong, our suppliers may have difficulty providing components on a timely basis.

In addition, during periods of shortages of components, we may have reduced control over pricing and timely delivery of components. We often quote prices to our customers and accept customer orders for our products prior to purchasing components and subassemblies from our suppliers. If our suppliers increase the cost of components or subassemblies, we may not have alternative sources of supply and may no longer be able to increase the cost of the system being evaluated by our customers to cover all or part of the increased cost of components.

The manufacture of some of these components is an extremely complex process and requires long lead times. If we are unable to obtain adequate and timely deliveries of our required components, we may have to seek alternative sources of supply or manufacture such components internally. This could delay our ability to manufacture or ship our systems in a timely manner, causing us to lose sales, incur additional costs, delay new product introductions and harm our reputation. Historically, we have not experienced any significant delays in manufacturing due to an inability to obtain components, and we are not currently aware of any specific problems regarding the availability of components that might significantly delay the manufacturing of our systems in the future. Any inability to obtain adequate deliveries, or any other circumstance that would require us to seek alternative sources of supply or to manufacture such components internally, could delay our ability to ship our systems and could have a material adverse effect on us.

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We need to manage our inventory of component parts, work-in-process and finished goods effectively to meet customer delivery demands at an acceptable risk and cost. For both the inventories that support manufacture of our products and our spare parts inventories, if the anticipated customer demand does not materialize in a timely manner, we will incur increased carrying costs and some inventory could become excess or obsolete, resulting in write-offs, which would adversely affect our cash position and results of operations. The sale of this inventory during periods of increasing revenue could temporarily impact our gross margins favorably due to the adjusted carrying value of this inventory, and could result in future unpredictability in our gross margin estimates.

We develop and manufacture a significant portion of our products in Germany, where our costs for labor and materials are primarily denominated in Euros, and anticipate increased manufacturing activities in South Korea going forward, where our costs for labor are primarily denominated in won. Future increases in the strength of the Euro or won, if any, could increase our development costs, our costs to manufacture systems, and our costs to purchase spare parts for products from our suppliers, which would make it more difficult for us to compete and could adversely affect our results of operations.

Although we outsource select core product manufacturing to third parties, we continue to produce our latest generation products at our two principal manufacturing plants in Fremont, California and Dornstadt, Germany. We have limited ability to interchangeably produce our products at either facility, and in the event of a disruption of operations at one facility, our other facility would not be able to make up the capacity loss. Our operations could be subject to disruption for a variety of reasons, including, but not limited to, natural disasters, including earthquakes in California, work stoppages, operational facility constraints and terrorism. Such disruption could cause delays in shipments of products to our customers, result in cancellation of orders or loss of customers and seriously harm our business.

We purchase insurance to help mitigate the economic impact of certain insurable risks; however, certain other risks are uninsurable or are insurable only at significant cost or cannot be mitigated with insurance. An earthquake could significantly disrupt our principal manufacturing operations in Fremont, California, an area highly susceptible to earthquakes. It could also significantly delay our research and development efforts on new products, a significant portion of which is conducted in California. We self-insure earthquake risks because we believe this is a prudent financial decision based on the high cost and limited coverage available in the earthquake insurance market. If a major earthquake occurs, we could suffer a major financial loss and face significant disruption in our business.

We rely on a combination of patents, copyrights, trademark and trade secret laws, non-disclosure agreements, and other intellectual property protection methods to protect our proprietary technology. Despite our efforts to protect our intellectual property, we may from time to time be subject to claims of infringement of other parties' patents or other proprietary rights. If this occurs, we may not be able to prevent the use of such technology. Our means of protecting our proprietary rights may not be adequate and our patents may not be sufficiently broad to protect our technology. Any patents owned by us could be challenged, invalidated or circumvented and any rights granted under any patent may not provide adequate protection to us.

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Furthermore, we may not have sufficient resources to protect our rights. When we outsource portions of our manufacturing, we are less able to protect our intellectual property ourselves, and rely more on our service providers to do so. Our service providers may not always be able to assure that their employees or former employees do not use our intellectual property for their own account to compete with us. Our competitors may independently develop similar technology, or design around patents that may be issued to us. In addition, the laws of some foreign countries may not protect our proprietary rights to as great an extent as do the laws of the United States and it may be more difficult to monitor the use of our products in such foreign countries. As a result of these threats to our proprietary technology, we may have to resort to costly litigation to enforce our intellectual property rights.

On occasion we receive notification from customers who believe that we are required to indemnify them or we have other financial obligations to them because of claims of intellectual property infringement made against them by third parties. Our involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets, even if the claims are without merit, could be very expensive to defend and could divert the attention of our management. Adverse determinations in any litigation could subject us to significant liabilities to third parties, require us to seek costly licenses from third parties and prevent us from manufacturing and selling our products. Royalty or license agreements, if required, may not be available on terms acceptable to us, or at all. Any of these situations could have a material adverse effect on our business and operating results in one or more countries.

In the normal course of business, we indemnify customers with respect to certain matters, for example if our tool infringes the intellectual property rights of any third party or if we breach any promise in our contract with the customer. During downturns in general or industry specific economic conditions, our customers may require that the extent and scope of our obligation to indemnify them be expanded because customers feel they have greater leverage in negotiating with us. In the future, we may be compelled to enter into or accrue for settlements under such indemnification provisions. Our financial performance could be materially adversely affected if we expend significant amounts in defending or settling any purported claims.

We are subject to a variety of federal, state, local and foreign laws, rules, and regulations relating to environmental protection and workplace safety. These laws, rules and regulations govern the use, storage, discharge and disposal of hazardous chemicals during manufacturing, research and development and sales demonstrations, as well as governmental standards for workplace safety. If we fail to comply with present or future regulations, especially in our manufacturing facilities in the United States, Germany and South Korea, we could be subject to substantial liability for cleanup efforts, personal injury, fines or suspension or cessation of our operations. We may be subject to liability if our acquired companies have past violations. Restrictions on our ability to expand or continue to operate our present locations could be imposed upon us as a result of such laws, rules and regulations, and we could be required to acquire costly remediation equipment or incur other significant expenses.

We may seek to divest of certain assets or businesses from time to time, especially if we need additional liquidity or capital resources. When we make a decision to sell assets or a business, we may encounter difficulty completing the transaction as a result of a range of possible factors such as new or changed demands from the buyer. These circumstances may cause us to incur additional time or expense or to accept less favorable terms, which may adversely affect the overall benefits of the transaction.

As part of our ongoing business strategy, we may consider acquisitions of, or significant investments in, businesses that offer products, services and technologies complementary to our own. Such acquisitions could materially adversely affect our operating results and/or the price of our common stock. Acquisitions also entail numerous risks, including:

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To the extent that shares of our stock or other rights to purchase stock are issued in connection with any future acquisitions, dilution to our existing stockholders will result, and our earnings per share may suffer. We may be required to incur debt to pay for any future acquisitions, which could subject us to restrictive covenants and other leverage concerns. Any future acquisitions may not generate additional revenue or provide any benefit to our business, and we may not achieve a satisfactory return on our investment in any acquired businesses.

Divestitures, acquisitions and other transactions are inherently risky, and we cannot provide any assurance that our previous or future transactions will be successful. The inability to effectively manage the risks associated with these transactions could materially and adversely affect our business, financial condition or results of operations.

We are currently undertaking a transfer of our operations from Canada to our Germany facility. This transfer plan may not be achieved in a timely and efficient manner, and may not fully realize the anticipated cost savings and synergies for a variety of reasons. Some of the risk related to this transfer include failure to obtain expected cost savings due to cost overruns in connection with the move or after operations commence; failure to merge our Canadian operations into our existing German operations; and employment and other law, rules, regulations or other limitations in foreign jurisdictions that could have an impact on timing, amounts or costs of achieving expected synergies.

In addition, we have from time to time enacted restructuring and other cost reduction plans designed to reduce our manufacturing overhead and our operating expenses. These restructuring efforts resulted or may result in significant restructuring charges that have adversely affected, and may continue to adversely affect, our results of operations for the periods in which such charges occur. Additionally, actual costs related to such restructuring plans have in the past, and may in the future, exceed the amounts that we previously estimated, leading to additional charges as actual costs are incurred. We expect to incur significant restructuring charges over the next 12 months, both in connection with our transfer of the Canadian operations and otherwise.

We are subject to taxation in the United States and various other countries. Significant judgment is required to determine and estimate worldwide tax liabilities. Our future annual and quarterly tax rates could be affected by numerous factors, including changes in the applicable tax laws, composition of earnings in countries with differing tax rates or our valuation and utilization of deferred tax assets and liabilities. In addition, we are subject to regular examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be materially different from the treatment reflected in our historical income tax provisions and accruals, which could materially and adversely affect our results of operations.

We may be required to record additional impairment charges that will adversely impact our results of operations.

We review our goodwill and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable, and also review goodwill balances annually. For example, during the year ended December 31, 2008, we recorded impairment charges of $18.1 million and $6.6 million related to the write-off of goodwill and certain intangible assets, respectively. The write-offs were triggered by the significant decline in our revenue and cash flows. The resulting assessment indicated a material decline in our market valuation and projected revenues, causing a decrease in the anticipated future cash flows

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attributable to these assets relative to the cash flow expectations when the assets were acquired. In the event that we determine in a future period that impairment of our intangible assets exists for any reason, we would record additional impairment charges in the period such determination is made, which would adversely impact our financial position and results of operations.

Our restated certificate of incorporation, our restated bylaws, our stockholder rights plan and Delaware law contain provisions that might enable our management to discourage, delay or prevent a change in control. In addition, these provisions could limit the price that investors would be willing to pay in the future for shares of our common stock. Pursuant to such provisions:

In addition, the provisions in our stockholder rights plan could make it more difficult for a potential acquiror to consummate an acquisition of our company. We are also subject to Section 203 of the Delaware General Corporation Law, which provides, subject to enumerated exceptions, that if a person acquires 15 percent or more of our outstanding voting stock, the person is an "interested stockholder" and may not engage in any "business combination" with us for a period of three years from the time the person acquired 15 percent or more of our outstanding voting stock.

None.

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Item 2. Properties

Our principal properties as of December 31, 2011 are set forth below:

In addition to the above properties, we lease an aggregate of approximately 31,000 square feet of office space for sales and customer support offices, worldwide. In Canada, we also lease approximately 18,000 square feet of office, plant and warehouse space for office, manufacturing and research facilities.

In total, we lease office space for headquarters, manufacturing, operations, research and engineering, distribution, marketing, sales and customer support in approximately 22 locations throughout the world: three in the United States, six in Korea, four in each of China and Taiwan, two in Germany, and one in each of Canada, Singapore and Japan. During 2011, we reviewed the utilization of our facilities and made appropriate amendments to our lease agreements as necessary. We consider these current facilities suitable and adequate to meet our requirements.

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 it is unlikely that any current claims or actions will have a material adverse impact on our operating results or our financial position, given the uncertainty of litigation, we cannot be certain of this. Moreover, the defense of claims or actions against us, even if not meritorious, could result in the expenditure of significant financial and managerial resources.

Our involvement in any patent dispute, other intellectual property dispute or action to protect trade secrets and know-how could result in a material adverse effect on our business. Adverse determinations in current litigation or any other litigation in which we may become involved and regulatory non-compliance, including with respect to export regulations, could subject us to significant liabilities to third parties or government agencies, 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.

In addition, as disclosed in Note 7, "Commitments and Contingencies" in Part II, Item 8 of this Form 10-K, we are working with the Bureau of Industry and Security to resolve certain inadvertent Export Administration Regulation violations.

Not applicable

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PART II

Our common stock has been traded on The NASDAQ Global Select Market since our initial public offering on September 28, 1994. Our stock is quoted under the symbol "MTSN". The following table sets forth the low and high closing prices as reported by The NASDAQ Global Select Market for the periods indicated:

On February 13, 2012, our common stock on the NASDAQ Global Select Market was $3.15 per share; and according to the records of our transfer agent, we had 195 stockholders of record of our common stock on that date. Because brokers and other institutions hold many of our shares on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

We have never paid cash dividends on our common stock and have no present plans to pay cash dividends. We intend to retain all future earnings for use in our business.

Information regarding our securities authorized for issuance under equity compensation plans will be included in Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," of this Annual Report on Form 10-K and is incorporated herein by reference from our definitive proxy statement relating to our Annual Meeting of Stockholders to be held in 2012.

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Comparison of Stockholder Return

The following graph compares the cumulative five-year total return on Mattson Technology, Inc.'s common stock relative to the cumulative total returns of The NASDAQ Composite index and the NASDAQ Electronic Components index:

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⁽¹⁾ Assumes that $100.00 was invested in Mattson Technology, Inc. common stock and in each index at market closing prices on December 31, 2006, and that all dividends were reinvested. No cash dividends have been declared on our common stock. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.

Our business depends upon capital expenditures by manufacturers of semiconductor devices. The level of capital expenditures by these manufacturers depends upon the current and anticipated market demand for such devices. Because the demand for semiconductor devices is highly cyclical, the demand for wafer processing equipment is also highly cyclical. The semiconductor equipment industry is typically characterized by wide swings in operating results as the industry moves through its cycle. In 2011, the semiconductor capital equipment market was impacted by several natural disasters, the continuing global macroeconomic problems, semiconductor inventory overbuild and DRAM oversupply. The DRAM market declined significantly in 2011, with DRAM capital expenditures continuing to soften. Despite the decline in DRAM, the NAND flash memory represented a growth segment in the semiconductor market in 2011, with revenue expected to grow for the year. The transition to mobility products such as tablet and eReader products, smartphones and the solid state drives (SSDs) helped to drive IC demand in the NAND flash, advanced RISC machines (ARM) and some advanced foundry areas. Overall, this resulted in demand that was technology-based in anticipation of capacity increases.

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⁽¹⁾ Not meaningful

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⁽¹⁾ Not meaningful