884498--7/31/2006--ADE

related topics

{property, intellectual, protect}

{product, market, service}

{stock, price, operating}

{customer, product, revenue}

{stock, price, share}

{acquisition, growth, future}

{product, liability, claim}

{provision, law, control}

{regulation, change, law}

{financial, litigation, operation}

{product, candidate, development}

{competitive, industry, competition}

{personnel, key, retain}

{operation, international, foreign}

Risks relating to our business. Our business depends in large part upon capital spending in the semiconductor wafer and device and data storage industries, which are highly cyclical. Our operating results can vary significantly from period to period due to a number of factors. Sales to foreign markets, especially Asian markets, constitute a substantial portion of our sales; therefore, our sales and results of operations could be adversely affected by downturns in economic conditions in countries outside of the United States. The loss of any one of our major customers would likely have a material adverse effect on us. We must expend a significant amount of time and resources to develop new products, and if these products do not achieve commercial acceptance, our operating results may suffer. Because of the high cost of switching equipment vendors in our markets, it is sometimes difficult for us to win customers from our competitors even if our metrology systems are superior to theirs. Our failure to protect our proprietary technology may significantly impair our competitive position and protection of our proprietary technology may be impossible or expensive. The laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Litigation may be necessary in order to enforce our patents, copyrights or other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement. Our current and potential competitors have significantly greater resources than we do, and increased competition could impair our business. We expect acquisitions and business combinations by our competitors and potential competitors in the metrology as well as in the defect inspection markets. Our dependence on subcontractors and sole or limited source suppliers may prevent us from delivering an acceptable product on a timely basis and could result in disruption of our operations. Key personnel may be difficult to attract and retain. Changes in, or interpretations of, accounting principles, such as expensing of stock options, could result in unfavorable accounting charges. As part of our business strategy, if the Merger is not consummated, we may make or seek to make acquisitions that may be difficult to integrate, disrupt our business, dilute stockholder value or divert management attention. Risks relating to the Merger Obtaining approval from German antitrust authorities or satisfaction of other conditions may delay or prevent completion of the Merger and these delays may cause additional costs and distractions. Provisions of the Amended Merger Agreement may deter alternative business combinations and could negatively impact the value of our common stock if the Amended Merger Agreement is terminated in certain circumstances. The Company, its directors, KLA-Tencor and South are involved in pending litigation with respect to the Merger, the result of which is uncertain. Risks relating to our stock price. Our stock price is volatile due to numerous factors, including unexpected operating results, the state of the markets in which we compete and other factors. We do not anticipate declaring any cash dividends on our common stock.

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884498--7/31/2006--ADE_CORP