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Veeco Announces Third Quarter and Nine Month 2008 Financial Results

October 27, 2008

PLAINVIEW, N.Y.--(BUSINESS WIRE)--Oct. 27, 2008--Veeco Instruments Inc. (Nasdaq: VECO) today announced its financial results for the third quarter and nine months ended September 30, 2008. Veeco reports its results on a generally accepted accounting principles ("GAAP") basis, and also provides results excluding certain items. Investors should refer to the attached table for details of the reconciliation of GAAP operating income to earnings excluding certain items.

Veeco will host a conference call reviewing these results at today 5:00pm at 1-877-723-9521 (toll free) or 1-719-325-4749. The call will also be webcast live on the Veeco website at www.veeco.com. A replay of the call will be available beginning at 8:00pm EDT tonight through midnight on November 4, 2008 at 888-203-1112 or 719-457-0820, using passcode 2520274, or on the Veeco website. Please also see the Veeco website for a slide presentation reviewing financial data.

    Third Quarter 2008 Highlights

    --  Revenue was $115.7 million, up 18% compared to $97.7 million
        last year, and within Veeco's guidance of $113-$118 million;

    --  Bookings were $90.2 million, down 24% compared to $118.3
        million last year, and below guidance of $113-$118 million;

    --  Net loss was ($1.7) million, or ($0.05) per share, compared to
        a net loss of ($5.7) million, or ($0.18) per share, last year.
        Veeco's guidance was for GAAP EPS to be between ($0.12) -
        ($0.03) per share.

    --  Veeco's earnings per share, excluding certain items, was $0.15
        compared to a loss of ($0.05) last year, in line with Veeco's
        guidance of $0.10-$0.15 per share.

John R. Peeler, Veeco's Chief Executive Officer, commented, "Veeco delivered strong top line revenue growth and a significant recovery in EBITA profitability in 2008 compared to 2007. Third quarter 2008 revenue and profitability increased significantly year-over-year in both our LED & Solar and Data Storage businesses, and profit improved in our Metrology business both sequentially and when compared to last year. For the first nine months of 2008, Veeco's revenue is up 12% and profitability has more than tripled from last year."

"Veeco's third quarter bookings of $90.2 million were lower than originally anticipated," continued Mr. Peeler. "While we anticipated a sequential bookings decline from the strong second quarter results, bookings were weaker than expected due to global economic conditions, with customers delaying or foregoing purchases. Veeco experienced the sharpest sequential order decline in metal organic chemical vapor deposition tools as the HB-LED industry digests the significant number of new tools purchased this past year."

Third Quarter 2008 Summary

Veeco's revenue for the third quarter of 2008 was $115.7 million, compared to $97.7 million in the third quarter of 2007. Third quarter 2008 operating income was $0.1 million compared with an operating loss of ($4.2) million in the third quarter of 2007. Veeco's third quarter 2008 earnings before interest, taxes and amortization excluding certain charges (EBITA) was $8.3 million which excluded $5.0 million in charges as detailed in the attached financial table, compared to a loss of ($1.7) million last year, which also excluded restructuring charges. Third quarter 2008 net loss was ($1.7) million, or ($0.05) per share, compared to a net loss of ($5.7) million, or ($0.18) per share, last year. Excluding amortization expenses and using a 35% tax rate, and excluding the $5.0 million in charges referred to above, as well as 2007 restructuring charges, third quarter 2008 earnings per share were $0.15, compared to a loss of ($0.05) in 2007.

Nine Month 2008 Summary

Veeco's revenue for the first nine months of 2008 was $332.5 million, compared to $295.7 million in the first nine months of 2007. Nine month 2008 operating income was $6.5 million compared with a loss of ($3.5) million in the first nine months of 2007. Veeco's EBITA was $22.3 million for the first nine months of 2008, compared to $6.8 million last year which excluded certain charges in both periods as detailed in the attached financial schedule. Net income was $0.9 million, or $0.03 per share in the first nine months of 2008, compared to a net loss of ($8.0) million, or ($0.26) per share, last year. Excluding amortization expenses and using a 35% tax rate, and excluding certain charges in both periods as detailed in the attached financial tables, earnings per share were $0.40 in the first nine months of 2008, compared to $0.10 in the first nine months of 2007.

Outlook

"We currently expect Veeco's full-year 2008 performance to remain solid, despite the backdrop of difficult economic conditions, with revenues in the range of $440-$450, up approximately 10% from last year, and profit improving dramatically," commented Mr. Peeler. "The Company is well-positioned to capitalize on exciting multi-year technology trends across our LED & Solar, Data Storage and Metrology businesses."

"While we have a healthy prospect list for new orders in the fourth quarter," continued Mr. Peeler, "it appears that the global economic climate and constrained financing environment may cause a broad slowdown in capital equipment purchases by our customers, with uncertainty as to the depth and duration of the downturn. Due to this limited visibility, we are unable to give an accurate estimate of fourth quarter orders. We are taking corrective actions to lower our cost structure in preparation for what is likely to be a down revenue year in 2009. Our goal is to keep Veeco profitable on the EBITA line by lowering our spending while maintaining strategic investments in R&D, particularly in our LED & Solar business. It is our intent to emerge from the present environment in a strong position to enable future revenue and profit growth."

Veeco currently forecasts fourth quarter 2008 revenues to be in the range of $110-$118 million. Since the Company is currently evaluating various cost cutting actions, it is likely that Veeco will incur restructuring charges in the fourth quarter, depending upon the timing and extent of actions under consideration. We are not able to estimate the extent of these charges at this time. Excluding these potential charges, amortization of $3.3 million, and using a 35% tax rate, Veeco's fourth quarter earnings per share are currently forecasted to be between $0.08 to $0.15 on a non-GAAP basis.

About Veeco

Veeco Instruments Inc. manufactures enabling solutions for customers in the HB-LED, solar, data storage, semiconductor, scientific research and industrial markets. We have leading technology positions in our three businesses: LED & Solar Process Equipment, Data Storage Process Equipment, and Metrology Instruments. Veeco's manufacturing and engineering facilities are located in New York, New Jersey, California, Colorado, Arizona, Massachusetts and Minnesota. Global sales and service offices are located throughout the U.S., Europe, Japan and APAC. http://www.veeco.com/

To the extent that this news release discusses expectations or otherwise makes statements about the future, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These factors include the risks discussed in the Business Description and Management's Discussion and Analysis sections of Veeco's Annual Report on Form 10-K for the year ended December 31, 2007 and in our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and press releases. Veeco does not undertake any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements.

               Veeco Instruments Inc. and Subsidiaries
                Consolidated Statements of Operations
                (In thousands, except per share data)
                             (Unaudited)

                               Three months ended   Nine months ended
                                  September 30,       September 30,
                               ------------------- -------------------
                                 2008      2007      2008      2007
                               --------- --------- --------- ---------

Net sales                      $115,709  $ 97,718  $332,465  $295,653
Cost of sales                    69,626    61,824   196,026   173,819
                               --------- --------- --------- ---------
Gross profit                     46,083    35,894   136,439   121,834

Operating expenses:
Selling, general and
 administrative expense          23,589    22,723    70,528    69,347
Research and development
 expense                         15,302    15,049    45,173    46,341
Amortization expense              3,148     1,959     7,530     8,236
Restructuring expense             4,120       529     6,995     1,974
Asset impairment charge               -         -       285         -
Other income, net                  (213)     (179)     (591)     (605)
                               --------- --------- --------- ---------

Operating income (loss)             137    (4,187)    6,519    (3,459)

Interest expense, net             1,052       665     2,913     2,256
Gain on extinguishment of debt        -         -         -      (738)
                               --------- --------- --------- ---------

(Loss) income before income
 taxes and noncontrolling
 interest                          (915)   (4,852)    3,606    (4,977)

Income tax provision                812       954     2,860     3,490
Noncontrolling interest             (54)     (123)     (200)     (482)
                               --------- --------- --------- ---------
Net (loss) income               ($1,673)  ($5,683) $    946   ($7,985)
                               ========= ========= ========= =========

(Loss) income per common
 share:
Net (loss) income per common
 share                           ($0.05)   ($0.18) $   0.03    ($0.26)
Diluted net (loss) income per
 common share                    ($0.05)   ($0.18) $   0.03    ($0.26)

Weighted average shares
 outstanding                     31,458    31,100    31,293    30,975
Diluted weighted average
 shares outstanding              31,458    31,100    31,498    30,975
               Veeco Instruments Inc. and Subsidiaries
                Condensed Consolidated Balance Sheets
                            (In thousands)

                                               September    December
                                                   30,         31,
                                                  2008        2007
                                              ------------ -----------
                                              (Unaudited)
ASSETS
Current assets:
   Cash and cash equivalents                      $117,684    $117,083
   Accounts receivable, net                         71,919      75,207
   Inventories, net                                105,659      98,594
   Prepaid expenses and other current assets         7,453       8,901
   Deferred income taxes                             2,781       2,649
                                              ------------ -----------
Total current assets                               305,496     302,434

Property, plant and equipment, net                  66,493      66,142
Goodwill                                           105,355     100,898
Other assets, net                                   62,273      59,860
                                              ------------ -----------
Total assets                                      $539,617    $529,334
                                              ============ ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                               $ 33,358    $ 36,639
   Accrued expenses                                 61,820      60,201
   Deferred profit                                   4,814       3,250
   Income taxes payable                              1,084       2,278
   Current portion of long-term debt                25,426      25,550
                                              ------------ -----------
Total current liabilities                          126,502     127,918

Deferred income taxes                                4,995       3,712
Long-term debt                                     120,889     121,035
Other non-current liabilities                        2,185       1,978

Noncontrolling interest                                814       1,014

Shareholders' equity                               284,232     273,677
                                              ------------ -----------
Total liabilities and shareholders' equity        $539,617    $529,334
                                              ============ ===========
               Veeco Instruments Inc. and Subsidiaries
Reconciliation of operating income (loss) to earnings (loss) excluding
                             certain items
                (In thousands, except per share data)
                             (Unaudited)

                               Three months      Nine months ended
                                   ended
                               September 30,       September 30,
                             -----------------   ------------------
                              2008      2007      2008       2007
                             ------   --------   -------   --------


Operating income (loss)        $137   ($4,187)    $6,519   ($3,459)

Adjustments:

Amortization expense          3,148      1,959     7,530      8,236
Restructuring expense         4,120(1)     529(4)  6,995(1)   1,974(4)
Purchase accounting
 adjustment                     927(2)       -       927(2)       -
Asset impairment charge           -          -       285(3)       -
                             ------   --------   -------   --------

Earnings (loss) before
 interest, income taxes and
 amortization excluding
 certain items ("EBITA")      8,332    (1,699)    22,256      6,751

Interest expense, net         1,052        665     2,913      2,256
Gain on extinguishment of
 debt                             -          -         -      (738)(5)
Adjustment to exclude gain
 on extinguishment of debt        -          -         -        738
                             ------   --------   -------   --------

Earnings (loss) excluding
 certain items before income
 taxes                        7,280    (2,364)    19,343      4,495

Income tax provision
 (benefit) at 35%             2,548      (827)     6,770      1,573
Noncontrolling interest, net
 of income tax provision at
 35%                           (35)       (80)     (130)      (313)

                             ------   --------   -------   --------
Earnings (loss) excluding
 certain items               $4,767   ($1,457)   $12,703     $3,235
                             ======   ========   =======   ========

Earnings (loss) excluding
 certain items per diluted
 share                        $0.15    ($0.05)     $0.40      $0.10

Diluted weighted average
 shares outstanding          31,598     31,100    31,498     31,319



(1) During the nine months ended September 30, 2008, the Company
 recorded restructuring charges of $7.0 million, of which $4.1 million
 was incurred during the third quarter of 2008 and $2.9 million was
 incurred during the first quarter of 2008. The third quarter
 restructuring charge consists of $3.7 million associated with the
 acceleration of equity awards and other severance costs resulting
 from the mutually agreed termination of the employment agreement of
 the Company's former CEO, as well as $0.4 million for severance and
 lease-related charges in Metrology. The first quarter restructuring
 charge consisted of $2.6 million of costs associated with the
 consolidation and relocation of our Corporate headquarters, and $0.3
 million of personnel severance costs.

(2) During the third quarter of 2008, the Company recorded $0.9
 million in cost of sales related to the acquisition of Mill Lane
 Engineering. This reduction was the result of purchase accounting,
 which requires adjustments to capitalize inventory at fair value.

(3) During the first quarter of 2008, the Company recorded a $0.3
 million asset impairment charge related to fixed asset write-offs
 associated with the consolidation and relocation of our Corporate
 headquarters.


(4) During the nine months ended September 30, 2007, the Company
 incurred $2.0 million in expenses, of which $0.5M was incurred during
 the third quarter of 2007 for personnel severance costs associated
 with its restructuring plan.

(5) During the first quarter of 2007, the Company repurchased $56.0
 million aggregate principal amount of its 4.125% convertible
 subordinated notes. As a result of these repurchases, the Company
 recorded a gain from the early extinguishment of debt in the amount
 of $0.7 million.


NOTE - The above reconciliation is intended to present Veeco's
 operating results, excluding certain items and providing income taxes
 at a 35% statutory rate. This reconciliation is not in accordance
 with, or an alternative method for, generally accepted accounting
 principles in the United States, and may be different from similar
 measures presented by other companies. Management of the Company
 evaluates performance of its business units based on EBITA, which is
 the primary indicator used to plan and forecast future periods. The
 presentation of this financial measure facilitates meaningful
 comparison with prior periods, as management of the Company believes
 EBITA reports baseline performance and thus provides useful
 information.
               Veeco Instruments Inc. and Subsidiaries
            Segment Revenues, Bookings, and Reconciliation
                 of Operating Income (Loss) to EBITA
                            (In thousands)
                             (Unaudited)

----------------------------------------------------------------------
                               Three months ended   Nine months ended
                                  September 30,       September 30,
                               ------------------- -------------------
                                   2008     2007      2008      2007
----------------------------------------------------------------------
LED & Solar Process Equipment
  Bookings                       $ 25,775 $ 48,679 $ 116,513 $ 121,448
  Revenues                       $ 40,983 $ 31,824 $ 128,204 $  82,188

  Operating income               $  2,963 $  2,704 $  18,833 $   5,013
  Amortization expense              1,587      492     3,040     3,774
  Purchase accounting
   adjustment                         927        -       927         -
  Restructuring expense                 -        -         7         -
                               ---------- -------- --------- ---------
EBITA                            $  5,477 $  3,196 $  22,807 $   8,787

----------------------------------------------------------------------
Data Storage Process Equipment
  Bookings                       $ 32,359 $ 32,239 $ 124,685 $ 105,837
  Revenues                       $ 43,256 $ 31,099 $ 104,097 $  98,840

  Operating income (loss)        $  5,787 $(2,058) $   7,466 $      42
  Amortization expense                952      952     2,856     2,854
  Restructuring expense                 -      159       124       159
                               ---------- -------- --------- ---------
  EBITA                          $  6,739 $  (947) $  10,446 $   3,055

----------------------------------------------------------------------
Metrology
  Bookings                       $ 32,031 $ 37,399 $  94,738 $ 109,392
  Revenues                       $ 31,470 $ 34,795 $ 100,164 $ 114,625

  Operating (loss) income        $  (887) $  (840) $ (1,304) $   1,482
  Amortization expense                495      399     1,295     1,135
  Restructuring expense               437       46       627     1,398
                               ---------- -------- --------- ---------
  EBITA                          $     45 $  (395) $     618 $   4,015

----------------------------------------------------------------------
Unallocated Corporate
  Operating loss                 $(7,726) $(3,993) $(18,476) $ (9,996)
  Amortization expense                114      116       339       473
  Restructuring expense             3,683      324     6,237       417
  Asset impairment charge               -        -       285         -
                               ------------------- -------------------
  EBITA                          $(3,929) $(3,553) $(11,615) $ (9,106)

-----------------------------------------=------------------=---------
Total
  Bookings                       $ 90,165 $118,317 $ 335,936 $ 336,677
  Revenues                       $115,709 $ 97,718 $ 332,465 $ 295,653

  Operating income (loss)        $    137 $(4,187) $   6,519 $ (3,459)
  Amortization expense              3,148    1,959     7,530     8,236
  Purchase accounting
   adjustment                         927        -       927         -
  Restructuring expense             4,120      529     6,995     1,974
  Asset impairment charge               -        -       285         -
                               ----------=-------- ---------=---------
  EBITA                          $  8,332 $(1,699) $  22,256 $   6,751

-----------------------------------------=------------------=---------

** Refer to footnotes on Reconciliation of operating income (loss) to
 earnings (loss) excluding certain items
    CONTACT: Veeco Instruments Inc.
             Financial:
             Debra Wasser, 1 516-677-0200 x1472
             SVP Investor Relations & Corporate Communications
             or
             Media:
             Fran Brennen, 1 516-677-0200 x1222
             Senior Director Marcom

    SOURCE: Veeco Instruments Inc.