1352341--12/19/2008--Verigy

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{customer, product, revenue}

{property, intellectual, protect}

{tax, income, asset}

{product, market, service}

{condition, economic, financial}

{system, service, information}

{stock, price, operating}

{cost, operation, labor}

{interest, director, officer}

{operation, natural, condition}

{financial, litigation, operation}

{operation, international, foreign}

{personnel, key, retain}

{stock, price, share}

{competitive, industry, competition}

Risks Relating to Our Business Current global economic conditions may have an impact on our business and financial condition in ways that we currently cannot predict. Our business and operating results could be harmed by the highly cyclical nature of the semiconductor industry. Our quarterly operating results may fluctuate significantly from period to period, and this may cause our share price to decline. We cannot ensure that we will be able to reduce our expenses as planned, and if we are unable to do so, our operating results will be harmed. We have a limited ability to quickly or significantly reduce our costs, which makes us particularly vulnerable to the highly cyclical nature of the semiconductor industry. Our dependence on sole source suppliers may prevent us from delivering our products on a timely basis. We are dependent on contract manufacturers with whom we do not have long-term contracts, and changes to those relationships, expected or unexpected, may result in delays or disruptions that could cause us to lose revenue and damage our customer relationships. The market for semiconductor test equipment and services is highly concentrated, and we have limited opportunities to sell our test equipment and services. If we do not maintain and expand existing customer relationships and establish new customer relationships, our ability to generate revenue growth will be adversely affected. Failure to accurately estimate our customers' demand and plan the production of our new and existing products could adversely affect our inventory levels and our income. Existing customers may be unwilling to bear expenses associated with transitioning to new and enhanced products. If we do not introduce new test equipment platforms and upgrade existing test equipment platforms in a timely manner, and if we do not offer comprehensive and competitive services for our test equipment platforms, our test equipment and services will become obsolete, we will lose existing customers and our operating results will suffer. Our long and variable sales cycle depends upon factors outside of our control and we may expend significant time and resources prior to our ever earning associated revenues. We face substantial competition which, among other things, may lead to price pressure and adversely affect our sales and revenue. Test systems that contain defects that harm our customers could damage our reputation and cause us to lose customers and revenue. We may face competition from Agilent in the future. Third parties may compete with us by using intellectual property that Agilent licensed to us under the intellectual property matters agreement. Third parties may claim we are infringing their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling our products or services. Third parties may infringe our intellectual property, and we may expend significant resources enforcing our rights or suffer competitive injury. Intellectual property rights are difficult to enforce in certain countries, which may inhibit our ability to protect our intellectual property rights or those of our suppliers and customers in those countries. We may incur a variety of costs to engage in future acquisitions of companies, products or technologies, and the anticipated benefits of any acquisitions we may make may never be realized. Our executive officers and certain key personnel are critical to our business. Funds associated with certain of our auction rate securities may not be accessible for in excess of 12 months and our auction rate securities may experience an other-than-temporary decline in value, which would adversely affect our income. We may be required to record a significant charge to earnings if our investments in equity interests become impaired. We may be required to record a significant charge to earnings if our goodwill becomes impaired. Our effective tax rate may vary significantly from period to period, and we could owe significant taxes even during periods when we experience low operating profit or operating losses. We sell our products and services worldwide, and our business is subject to risks inherent in conducting business activities in geographies outside of the United States. If our facilities or the facilities of our contract manufacturers were to experience catastrophic loss due to natural disasters, our operations would be seriously harmed. Risks Related to the Securities Markets and Ownership of Our Ordinary Shares. At times, our stock price has fluctuated significantly, and such fluctuations in the future could result in substantial losses for our investors. We may become involved in securities litigation that could divert management's attention and harm our business. It may be difficult for investors to effect service of process within the United States on us or to enforce civil liabilities under the U.S. federal securities laws of the United States against us.

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1352341--12/19/2008--Verigy_Ltd.