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Executives

Andy Moring - CFO

Dave Dutton - CEO

Analysts

Patrick Ho - Stifel Nicolaus

Gary Hsueh - Oppenheimer

Peter Kim – Deutsche Bank

Edwin Mok – Needham and Company

Joe Phang – JP Morgan

Ben Pang - Caris & Company

Tim Arcuri - Citigroup

Mark Fitzgerald – Unidentified Company

Mattson Technology, Inc. (MTSN) Q3 2008 Earnings Call October 22, 2008 6:00 PM ET

Operator

Good day and welcome to the Mattson Technology Inc. third quarter 2008 financial results conference call. Today’s conference is being recorded. Information provided in today’s conference call contains forward-looking statements regarding the company’s future prospects, including but not limited to anticipated market position, bookings, revenue, margins, earnings per share, tax rate and fully diluted shares outstanding for future periods.

Forward-looking statements address matters that are subject to a number of risks and uncertainties that can cause actual results to differ materially. Such risks and uncertainties include but are not limited to those described in today's news release and in the company's Forms 10-K, 10-Q and other filings with the Securities and Exchange Commission. The company assumes no obligation to update the information provided in this conference call.

At this time I would like to turn the conference over to Mr. Andy Moring, Chief Financial Officer of Mattson Technology; please go ahead sir.

Andy Moring

Thank you and welcome to our 2008 third quarter conference call. With me today is our President and CEO, Dave Dutton. After I review the financial performance and give guidance, Dave will comment on the business and then we will open up the call for Q&A.

As you are all aware we find ourselves in unprecedented economic times. Global and macroeconomic dynamics continue to hamper the markets and server to compound the challenges that semiconductor capital equipment companies face.

At times like these the companies that survive have strong balance sheets and manage their business with prudence and a rational pragmatic approach and that is the path we have followed and intend to continue.

Our focus has been on the following three areas, first continuous cost reduction to minimize cash losses from operations. Second, investment in new products to gain share in the key new markets the dielectric etch and millisecond anneal. And third growth our market share position in our core segments of strip and RTP.

We have demonstrated that we can cut costs and we will continue to do so. But we will not jeopardize our strategic initiatives.

While Dave will discuss our product advancement in greater detail, there are a few key points I would like to emphasize relative to our financial performance for the third quarter.

First our balance sheet continues to be strong and is a reflection of our strict financial discipline. Among our peers our cash position at $2.37 per outstanding share remains one of the strongest in our industry.

Second while we were within guidance on revenue we were below target on our gross margin and overall operating results for the quarter. This was attributable to manufacturing absorption costs and operating reserve adjustments caused by the lower production volumes and higher operating expenses due to the increased spending in our new product introduction efforts.

Third while continuing to invest in our new products we continued to reduce our cost structure in manufacturing and back office organizations. In September we announced a cost alignment plan including a headcount reduction of roughly 14% of our global workforce.

The restructuring positions us to minimize the cash drain in anticipation of a longer downturn then previously thought. Now to a more detailed look at our financial results for the third quarter.

Net sales of $30 million were down 15% from the second quarter excluding the DNS royalty payment in that quarter. Revenue percentage breakdown was southeast Asia and China 28%, Korea 24%, Japan 21%, Europe 10%, Taiwan 9%, and North America 8%.

Memory was the largest segment at 63% followed by logic and other applications at 20% and foundry at 17%.

Third quarter gross margin was 25.5%, down from 34.1% for the second quarter excluding the DNS payment. This decline was the result of under-absorption of factory costs resulting from the lower revenue levels and the expensing of additional operational reserves.

The operational reserve adjustments were for inventory charges and warranty expenses. The above average inventory charges were a result of our methodology of comparing inventory on hand against lower forecasted volumes.

Much of this cost will be recovered as volumes return to more normal levels. The warranty adjustments reflect field support spending against a diminishing warranty base. We have specifically not made any significant cuts in our customer field support organization as it will be essential for our success in the future.

Average selling prices and corresponding tool gross margins are not eroding as a result of the downturn. Third quarter operating expenses were $28.8 million which included $1.9 million in restructuring charges related to the cost alignment announced in September.

Excluding restructuring costs operating expenses were $1.9 million higher then the second quarter due to additional expenses on new product development initiatives and spending on qualification of new product evaluation tools placed at customer facilities.

Costs other then product development and new product introduction continued to decline per our restructuring activities in Q2 and Q3.

Third quarter net loss was $20.7 million or $0.42 loss per diluted share. Included in these results was an impact of $0.04 per share attributable to the cost alignment plan. We will continue to recognize restructuring expenses to the alignment plan in the next few quarters as we execute to the plan.

Total expenditures will be between $4.5 million and $5.5 million as previously announced. Turning now to the balance sheet our balance sheet remains strong and reflects sound financial and operational controls.

Cash, cash equivalents and short-term investments at the end of the third quarter were $118 million, down 13% from the previous quarter. There were no stock repurchases during the quarter. Our cash and cash equivalents are highly liquid and we continue to have no offsetting debt.

We recognize that with the continued weak market it is going to be essential that we maintain a healthy cash position and minimize reductions in our cash balances. We believe that the current cash balance and our ongoing cost reduction disciplines as evidenced by the cost alignment plan will help us to weather current market conditions.

Inventories decreased by $4 million during the quarter. Approximately 35% of or inventory is for evaluation tools already delivered or new product inventories being built for shipment to our customers production sites.

Another 25% of inventory is for our worldwide spare parts support requirements.

I will now turn to our guidance for the fourth quarter of 2008, because of the macroeconomic situation and the over supply conditions in the semiconductor market, our customers will continue to dramatically reduce their capital expenditures until market conditions improve.

We expect that this condition will have a significant on the company for the near-term. Our guidance is as follows.

Q4 revenues in the range of $12 million to $18 million, gross margins will be below 25% because of manufacturing under-absorption at these very low volumes and earnings will be in a range of loss per share of $0.53 to loss per share of $0.44.

So let me summarize, our industry is experiencing an unprecedented downturn intensified by the current global economic conditions. However Mattson maintains the significant amount of cash that enables us to continue to invest in our future.

We have consistently shown our ability to [inaudible] spending to focus on our new product introduction strategy while also minimizing our cash losses. We will continue to execute our growth strategy, better positioning Mattson for long-term growth.

Now I will turn the call over to Dave who will elaborate further on Mattson’s business results and prospects.

Dave Dutton

Thanks Andy, and good afternoon everyone. These are extremely challenging times with a number of unusual factors converging to dramatically impact technology spending. We continue to see a decline in the market for semiconductors and semiconductor capital equipment with unprecedented weakness in capital spending.

Our customers are responding to the worsening financial environment by reviewing their respective expansion plans and delaying those that they do not deem absolutely critical at this time.

While memory and foundry markets continued to be weak we do see limited investments in technology node advancements and fab efficiencies. But there are literally no capacity ramps at this time and the horizon is unclear.

So in this environment, how does Mattson respond? At times like these the companies that survive must have strong balance sheets and differentiated technology. We have made strategic decisions that we determined would ensure the future success of our company.

Specifically we expanded into new markets and we revamped our strip technology which led to the evolution of the Suprema system. From a financial standpoint we avoided debt and preserved cash. We focused on emerging critical applications where our technology would be a differentiating factor in advance technology nodes.

In today’s price sensitive environment productivity is a bigger factor in winning orders and Mattson is a clear leader.

We’re delivering leading technology at the lowest cost of ownership. Let’s talk about how our products are positioned starting with the progress we are making in our core products of strip and RTP.

In dry strip the Suprema system is a great success story. Even in these difficult times we continue to gain market share and believe that we have recaptured our market leadership. You don’t take market share in a downturn unless the product is one of those must-haves for fab.

Suprema is just that; an essential tool for well functioning fabs. During the quarter we shipped the first Suprema system to three new customers in Japan and North America. In addition we recently announced the shipment of a system to a leading Asian manufacturer for high high-k and metal gate ash development.

This is further evidence that the Suprema is the market leader in strip. In rapid thermal processing we have used the downturn to work more closely with our top customers to qualify advanced applications. We are also moving steadily to penetrate logic applications taking advantage of the Helios systems differentiated capabilities specifically in low temperature anneal and pattern independence which are both key enabling attributes for next generation [sub 3xnm] nodes.

Alpine and Millios qualification at key customer sites made meaningful progress during the quarter and continue to receive clear commitment and support from our customers. However as a result of the market conditions we do not anticipate revenue from the Alpine and Millios product lines until overall conditions improve.

And finally lets move to the Etch market where our customers are continuing their process development in spite of slow market conditions. We are actively engaged with six customers, that’s up from one last year and in many different process applications such as spacer etch [inaudible] and hardmask open.

And we expect placements by some of these customers in the first half of 2009. during the quarter a key customer expanded Nexion qualification activities to their next generation which means they are preparing their next capacity ramp with Nexion.

In addition this customer expanded Mattson’s etch development in advanced memory applications and we expect to see shipment to their advanced development lines later this year.

Before we take your questions, let me close by saying is weathering the storm. Current economic conditions place us all in unchartered territory. I don’t need to cite a litany of issues, we are all aware of them. We clearly recognize the severity of the current conditions and are very realistic about the macroeconomic climate.

But we don’t manage by fear. We manage as we always have, for the long-term and we’re optimistic about Mattson’s future.

For Mattson regardless of the down market we maintain strategic investments in our product development and we believe this positions us for market share and revenue gains upon a return to improved industry conditions.

Our value proposition remains solid technology at the lowest cost of ownership aligning our solutions to our customers’ needs in an era where decreasing their costs is as important as advancing Moore’s loss.

Current economic conditions are accelerating the market that is moving toward our traditional strength of productivity and we see opportunities clearly ahead of us. While our customers are curtailing spending they are always willing to invest in certain areas they deem critical with technology and productivity at the forefront and Mattson is a leader in both.

There are a limited number of technology buys going on and we are positioned for those particularly in thermal. Customers continue to spend to improve cost efficiencies of their fab and we play a big role in this area with Nexion and Alpine. We have clearly differentiated technology in emerging markets of dielectric etch and millisecond anneal.

We continue to maintain a strong financial foundation to support the company’s growth strategy and future business objectives. History has shown that prudent investment in a downturn translates to share gains in the upturn.

If you wait for the market to recover to spend on new products you’re too late. Our cash reserves have been built with the cyclical nature of this industry firmly in mind and we have one of the strongest cash positions in this industry.

As we successfully execute to our plans we are confident that Mattson is positioned to outgrow the market in the next upturn.

And with that I’d like to thank you very much for listening. We are now open for your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Patrick Ho - Stifel Nicolaus

Patrick Ho - Stifel Nicolaus

In terms of this downturn, you’ve gone through a few of these, can you just compare it to the 2001, 2002 time period, how its similar and how its different as well?

Dave Dutton

We’ve been through a few of these and I think at the heart of this one, its certainly moving into as much like the 2001, 2002 downturn but with the current economic conditions that we see its really adding a level of uncertainty and essentially lack of clarity on how this is going to move forward and I think that’s where also we look at from an experience standpoint the team here has been through these. It’s a matter of knowing where to focus and being able to keep our eye on delivering for our customers because we know what they will need and being in the position to make sure we are ready to deliver when they do decide to ramp and we just don’t have clarity on when that is but we know to be patient and be ready for when it happens.

Patrick Ho - Stifel Nicolaus

In terms of your services the spare parts business, obviously I think the current environment that we see that tool shipments have come down quite dramatically and been pushed out to a later time period, can you comment on the service and the spare parts business and how that’s trending. Are you seeing a dramatic decline there as well or is that something that kind of helps steady through these last few quarters and going forward?

Dave Dutton

In the last quarters we’ve seen it hold steady and going forward it looks like its holding pretty steady for us and of course as revenues comes down it becomes a bigger portion of revenues but we’re seeing our customers continue to need that level of service and we’re delivering to it.

Patrick Ho - Stifel Nicolaus

On the macroeconomic environment how its affecting you, have any of your customers, especially the second tier one have they come to you looking for extensions in terms of payments and such?

Dave Dutton

In this environment and probably in any environment our customers are always negotiating hard and we treat all our customers very much fairly and the same and we also focus on delivering to a very respectful and conservative financial terms as we deliver to our customers.

Operator

Your next question comes from the line of Gary Hsueh - Oppenheimer

Gary Hsueh – Oppenheimer

Could you quantify the service and spares business, you said that was holding steady, what kind of absolute value is that?

Dave Dutton

We don’t break out our revenue in that level but like I said it is holding steady.

Gary Hsueh – Oppenheimer

So I get my basis right here for gross margin on an ongoing basis what was the extent of the inventory charge in the September quarter?

Andy Moring

I think if you take a look relative to our guidance we were off approximately $2 million relative to guidance and I’d say approximately half of that was associated with inventory charges and the other half associated with warranty and absorption issues.

Operator

Your next question comes from the line of Peter Kim – Deutsche Bank

Peter Kim – Deutsche Bank

Considering that you have a lot of evals OpEx is remaining relatively high because some of the evals and some of the evals in your inventory could you talk about what your cash burn outlook looks like for the next couple of quarters.

Dave Dutton

We do have a number of evals our there and those continue to really bring more interest and expansion of our capabilities and our customers so we’re certainly excited about the investment that those investments are bring in return as we move forward.

As far as our cash burn I would look at it this way, over the last month we’ve seen the macroeconomic conditions worsen. We’ve seen customers get more cautious. As we mentioned we have a cost reduction plan and on top of that we continually work and adjust our expenses in order to make sure that our cash flow and our cash burn rate keeps us very strong and ready for the next up cycle.

Peter Kim – Deutsche Bank

Could you talk about, when you look at the guidance, what percentages do you expect to be in memory and what percentage of your revenue is churns business from your evals churning into revenue.

Dave Dutton

I look at probably from a memory standpoint for us its still fairly high, probably about 50% is in memory. Most of it around [inaudible] if you look at it, I don’t want to get more specific then that and overall on a turns business when we get in this part of the environment because our products are pretty much on a 13-week or less cycle time because that’s how we deliver very strongly as an attribute to our customers when we get to this part, a fair portion of our business is turns business. Whether its coming from our factory or whether its some of the existing eval tools, I don’t think I have that number on the top of my head.

Peter Kim – Deutsche Bank

What is a typical churn time for an eval tool to get an idea about the time between when you ship the eval tool to when you actually recognize it as revenue.

Dave Dutton

On very new technologies like the millisecond anneal it can be up to 12 months. Sometimes on industry conditions it could get dragged out a bit as customers utilize to learn more and then in a more typical case such as Suprema second generation Helios, you typically see those in the four to six month time frames.

Operator

Your next question comes from the line of Edwin Mok – Needham and Company

Edwin Mok – Needham and Company

Are you expecting any restructuring charges for the quarter?

Andy Moring

For the fourth quarter yes, as we stated we will continue to see restructuring charges from the plan that was announced in Q3 and that will last through the next several quarters until we’ve executed fully the plan.

Edwin Mok – Needham and Company

I notice that you didn’t have any cost savings in the OpEx line for the September quarter and based on your guidance you seemed to imply that your OpEx was around the same level, when will we start to see those costs savings to kick in and how much do you expect towards the first half of 2009?

Andy Moring

As we said the restructuring that we announced at the end of the third quarter would have an impact on the spending and we expect that to start immediately in the fourth quarter and continue on from there. The additional spending in the third quarter had to do with a lot more activity with our new products increasingly on the etch side as well. That was why we went higher then we thought. Again we are doing everything to control costs on the back office but certainly when we have opportunities where we have to spend in order to get interest in our new products we will continue to do that.

Edwin Mok – Needham and Company

Regarding the etch product, sounds like you are engaging some new customers, when do you expect to recognize revenue for the products that you have at the customers space right now and just some color on shipment time frames for this new product.

Dave Dutton

As I mentioned we’re pretty excited about this. We are engaged at essentially six customers now in different forms and getting a lot of excitement from the etch program and if you look at where we are with existing customers we are process of record across a number of applications and as they move towards ramping in some of those areas we areas we are absolutely expecting the Nexion to be part of that. Clarity on when that is with the current economic conditions, I don’t want to put anything more down on a time frame then that.

Edwin Mok – Needham and Company

And regarding revenue recognition for the ones you have shipped?

Dave Dutton

Again I think that is more related to economic conditions and as they get clarity going into next year.

Edwin Mok – Needham and Company

Stock comp expense for the last quarter?

Andy Moring

Its holding flat at approximately $1.1 million.

Operator

Your next question comes from the line of Joe Phang – JP Morgan

Joe Phang – JP Morgan

Why are your revenues going down 50% in 2008 when the industry is forecasted to be down 30 to 35%, can you tell us what’s going on there?

Dave Dutton

From a standpoint of the industry going down versus what we’re going down, as we’ve talked about before what we’re focused on is with our key customers, what we’ve seen in some areas especially in our thermal area where there was over capacity coming into this year, we’ve seen that drop off slightly more. We’ve seen actually our Suprema drive some share gains this year and we’re seeing that actually being very strong versus the quarter so I think in the end you’re looking at really kind of a industry forecast by some of the outside analysts viewing the industry on an assumption basis but I think if you compare us to any of our peers we’re right in line with where the rest of everybody seeing the market and absolutely at the customer base, we’re all in the same customers.

We’re in a majority of the top ten customers. We’re very well positioned in them and we’re moving to the market as they move with the market.

Joe Phang – JP Morgan

So you think that the market is down almost 50% and its not due to any market share loss on your end?

Dave Dutton

We are not losing market share.

Joe Phang – JP Morgan

Do you have a view on [inaudible] in 2009 and how Mattson compares relative to that?

Dave Dutton

I don’t want to forecast because frankly the visibility is so poor but I don’t have any confidence that 2009 is up and I think it will be down to some degree, what’s hard to call is how much and I think that just depends on how severe the credit freeze is and when does consumer spending start to come back and therefore drive our industry forward.

Joe Phang – JP Morgan

How much revenue did you generate in calendar 2008 for new products and how much are you expecting to generate from new products in 2009?

Dave Dutton

In 2008 we’re looking at generating somewhere between 10% which is about what the target we gave you and in 2009 I don’t want to talk about it yet. We’re still building that plan and again the uncertainty right now we’re still working to complete where we think the market is going to be.

Joe Phang – JP Morgan

What’s the current breakeven now for the company on a revenue basis?

Andy Moring

We’ve stated that the breakeven is approximately $50 million. That of course is certainly dependent upon the product mix of the products that we ship.

Operator

Your next question comes from the line of Ben Pang - Caris & Company

Ben Pang - Caris & Company

I want a clarification on the Nexion, you are the process of record for a couple of these evaluations that you mentioned, why wouldn’t you get signed up on those tools?

Dave Dutton

I don’t want to get into specifics about our working with our customers but we continue to move forward with them and in conditions like these we work with our customers and continue to have them work on expanding applications there and work with the tool and that’s more important to us then when we get sign off.

Ben Pang - Caris & Company

In the past you’ve commented that the growth is on the D ram side, the application, the first application you expect was volume orders was for D ram, is that still the scenario?

Dave Dutton

What I commented on was we first penetrated D ram and due to Nexion strength its actually continued to [push] right out into other aspects of memory and in fact some of the customers we’re engaged with are also outside of that in the foundry area.

Ben Pang - Caris & Company

So you seem to be pretty well situated at several places, at least somewhere between the development and a process of record, at what point will you stop the activity for the evaluations. You are in the top tier of each segment already, why do any more evaluations at this point?

Dave Dutton

I think essentially we never stand still and we always have new technologies coming out, new products and new product iterations coming out and those tend to be where the evaluations are and especially for millisecond anneal and etch where we continue to be at the forefront and in some areas they’re new areas, emerging areas for the customers such as hardmask open and such where an evaluation is the most useful way for us to share our engineering knowledge and them to share their knowledge in joint learning and producing the best results for our customers.

We’ll continue to utilize that method. Its been very strong for us to drive market share gains as we move through the up cycle.

Ben Pang - Caris & Company

If I follow that line of reasoning, can you share if 2009 is heavily dominated by a lot of R&D activity what applications will your products really be focused on and I’m more interested in is it high-k gate or is it, what areas do you see a lot of R&D activity that would benefit your product offerings?

Dave Dutton

For Mattson its really broad and I’ll just touch a few, in thermal like I mentioned as you get down to the next generation nodes, the interface at the refractory metal such as nickel, platinum, silicide to ensure the silicon consumption at that level requires a very low temperature and we are the leader in that area. So we’re very enabling there in RTP and along with pattern independence as devices get closer together. Around RTP its transistor formation and the first metal connect to silicon. Also the millisecond anneal and our ability to drive a very flexible and unique process combination there so it all will be around that area in that transistor formation.

In stripping it really is around the areas of cleaning off of some of these exotic and new metals such as high-k gates, low-k metal gates, all those areas our Suprema is showing some real strength. I mentioned we just shipped one where we won the qualification there in that area.

In etching it really is from advance spacer which is becoming more and more critical and the aspect [ratios] there are starting to grow to things like hardmask open where again those are areas as we get into more types of patterning to actually help shape the critical dimension that’s where our ability to tune that plasma, so we’re very busy and we are very well positioned at the leading edge and we not only deliver these technology capabilities, what our customers really like about Mattson is we deliver them at a better cost of ownership then our competitors so our customers really get great performance, help them define the future, at the same time give them a better value which is critically what they need right now in today’s difficult environment.

Ben Pang - Caris & Company

At the current volumes you are shipping at, are you still using an outsource partner for building some of the tools?

Dave Dutton

Yes.

Ben Pang - Caris & Company

How do we think about the gross margins when during this time, are you stable at this level because you are using the partner, I assume they’re at the ultimate low levels.

Andy Moring

When we’re shipping some of the legacy products, Aspen III, we will fully outsource that type of product set. When we’re dealing with more of our core products we have a combination of outsourcing partners and some of the technology is made internally, so its hard to really predict but once you qualify a vendor and especially if you turn certainly all of the production over to that vendor then its difficult to bring that production back and its actually more expensive to do so.

Ben Pang - Caris & Company

Is there any mix issue we need to worry about outside of just the lower volume for gross margins over the next two quarters?

Andy Moring

No I wouldn’t think so, I think we continue to be more primarily going towards our core and new products at this point in time.

Operator

Your next question is a follow-up from the line of Edwin Mok – Needham and Company

Edwin Mok – Needham and Company

In terms of cost reduction, given that [inaudible] has dropped down to this level, any thought of additional cost reduction steps that you plan to take in the coming quarter or the coming year?

Andy Moring

We’re continually reviewing the financial situation and I think you’ve seen over the last six months we’re not afraid to take actions to cut all costs. Obviously in the current financial crisis we need to sit down and review that and just be assured that that’s the constant thing that the management team does. Of course the best situation would be if we were able to increase our revenue and the sales force is working diligently to look for every opportunity to do just that.

Edwin Mok – Needham and Company

In terms of breakeven levels you mentioned about $50 million, how much more can you bring down that level?

Andy Moring

When we’re talking about the current volumes that we put in our guidance that’s such an extremely low level that getting close to that breakeven point is next to impossible. That doesn’t mean that we aren’t going to do everything we can to minimize the cash drain and I think that’s foremost in our thinking right now.

Operator

Your next question comes from the line of Tim Arcuri - Citigroup

Tim Arcuri - Citigroup

Could you let me know what run rate we should assume for 2009 for R&D, would it be flat from where it is right now?

Andy Moring

I think due to the cost reductions efforts that we did take in the third quarter you should see that number come down certainly it will come down from the Q3 levels which were an anomaly. It will be probably slightly below the Q2 levels which is a more reasonable run rate to assume.

Tim Arcuri - Citigroup

Given that there is news, assumptions about Samsung cutting CapEx next year in a large way, and with all the trouble the Taiwanese memory [inaudible] people are having does that impede your plans for some of your new products as opposed to what you had in mind for 2009?

Dave Dutton

As I mentioned it doesn’t impede the learning and the actual establishment of those products in our accounts but it certainly does impede when the revenue will start to grow from those new products because it is much aligned to when our customers will start their expansion plans and so its really, the revenue expansion from those is market driven. Our effort to continue to penetrate these products we are not letting off the gas pedal at all on that.

Tim Arcuri - Citigroup

On the Nexion product could you state how many wins you had in head to head with competitors? I know you’re engaged with six customers and one customer you said you’re moving into their next generation for their ramp any kind of number on how many wins?

Dave Dutton

No I didn’t give any number, we’re engaged with six and we’ve so far had a win at one key customer and are moving up forward.

Operator

Your next question is a follow-up from the line of Patrick Ho - Stifel Nicolaus

Patrick Ho - Stifel Nicolaus

On the R&D, I understand the dollars that need to go into the new products, how much leverage do you get in terms of R&D dollars in terms of your core strip and RTC businesses now that you have the Suprema platform, I’m going to assume that you’re able to leverage and actually reduce probably R&D spending going forward since its off the same platform.

Andy Moring

In our industry there’s always sustaining engineering that goes on. You can reduce them somewhat but sustaining will always continue. As you know our customers always want to do new and different things and more challenging things with the existing products. So there will always be a core amount of spending on those but certainly our major effort right now and certainly our growth in spending is entirely devoted to the new products.

Operator

Your final question comes from the line of Mark Fitzgerald – Unidentified Company

Mark Fitzgerald – Unidentified Company

Is there some threshold limit for cash that you just won’t go below at this point or--?

Andy Moring

Yes, we’re looking at that. We obviously are at kind of the upper range of our quarterly cash drain tolerance and we certainly can’t let this last much longer. No we don’t specifically have a target for cash decline but we certainly need to look at this and act appropriately.

Operator

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

Dave Dutton

Once again thank you for joining our third quarter conference call. Let’s hope that the issues impacting the technology sector and the overall economy find relief and that things ultimately improve for all of us. We look forward to speaking with you throughout the quarter and as we complete 2008.

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Source: Mattson Technology, Inc. Q3 2008 (Qtr End 09/28/08) Earnings Call Transcript
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