This Annual Report on Form 10-K contains certain forward-looking statements. For purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, any statements using the terms "believes," "anticipates," "expects," "plans" or similar expressions, are forward-looking statements. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. There are a number of important factors that could cause our actual results to differ materially from those indicated by forward-looking statements made in this report and presented by management from time to time. Some of the important risks and uncertainties that may cause our financial results to differ are described in Item 1A. "Risk Factors."

Overview

We are the leading supplier of ion implantation equipment used in the fabrication of semiconductor chips. We design, manufacture, market and service semiconductor processing equipment for virtually all of the major semiconductor manufacturers in the world. The VIISta ion implanter products are designed to leverage single wafer processing technology for the full range of semiconductor implant applications. We have shipped more than 4,000 systems worldwide.

We provide support, training, and after-market products and services that help our customers obtain high utilization and productivity, reduce operating costs and extend capital productivity of investments through multiple product generations. In fiscal year 2009, we were ranked number one in customer satisfaction in VLSI Research Inc.'s customer survey for all large suppliers of wafer processing equipment, an honor received in twelve of the past thirteen years.

Our industry is cyclical. The business depends upon semiconductor manufacturers' expectations and resulting capacity investments for future integrated circuit demand. Historically, our business has experienced significant volatility and we believe the semiconductor capital equipment business will continue to be volatile, largely due to fluctuations in the level of investment by foundry and memory manufacturers. During fiscal year 2009, we experienced a decrease in revenues of 57% compared to fiscal year 2008. This decline is in addition to a decline of approximately 21% in revenue from fiscal year 2007 to fiscal year 2008. We believe that overcapacity in the memory market was the primary driver for the decline in business from fiscal year 2007 to fiscal year 2008. We also believe that continued overcapacity in the memory markets, along with the global credit crisis and the decline in end-user demand for semiconductors has resulted in the rapid decline in revenue during fiscal year 2009. These factors are expected to continue to negatively impact our business through at least the first quarter of fiscal year 2010. Our after-market business has also been adversely affected as fabs are running at lower utilization levels, thus requiring fewer parts, upgrades and services.

We believe that our management team has the industry experience to quickly and effectively react to sizing adjustments required by the volatility in the market. As such, we began resizing our business in fiscal year 2008 and continued through fiscal year 2009. We do not expect any further significant restructuring activities at this time, but do plan to continue to closely monitor the industry.

Despite the decline in revenue, we believe that we have the financial strength and liquidity to continue investing in product development such that we can continue to maintain our leading industry position. At fiscal year end 2009, we had $322.6 million in cash and investments and approximately $2.2 million in debt. Furthermore, despite the year to date loss, we generated approximately $41.7 million in cash from operations during fiscal year 2009.

Our business is tied closely to our market share and the total available market for ion implanters. Calendar year 2008 semiconductor capital expenditure reports show that the total available market for ion implanters decreased by approximately 40% versus calendar year 2007. In addition, based mainly on references to leading industry analyst reports and current customer buying patterns, we believe that semiconductor capital equipment spending will significantly decline in 2009 from 2008.

Wafer size and market. Most advanced devices below 90nm are produced on 300mm wafers. Memory manufacturers typically produce integrated circuits used for flash and dynamic random access memory, or DRAM, which store and retrieve information, while logic manufacturers typically produce integrated circuits used to process data. Foundry manufacturers have the capability to produce both memory and logic wafers.

Market Share and Total Available Market. The table below shows our calendar year 2008 and 2007 market share, as reported by Gartner Dataquest in April 2009 and April 2008, respectively. Market share estimates are calculated on a subset of revenue, and information reported by Gartner Dataquest may not be consistent on a company by company basis. The table below also shows the total available market for ion implanter sales in calendar years 2008 and 2007, also reported by Gartner Dataquest in April 2009 and April 2008, respectively. The total available market represents estimated worldwide total revenue for ion implanters sold during each of the calendar years.

                                 Market Share             Total Available Market
                                Calendar Year                 Calendar Year
                              2008          2007          2008           2007
                                                          (Amounts in millions)
          By market
          Medium current        41.5 %        56.6 %    $     281    $         454
          High current          78.1 %        77.8 %          371              672
          High energy           22.8 %        12.8 %           79              147
          Ultra high dose      100.0 %       100.0 %           67               64

          Overall               61.5 %        64.5 %    $     798    $       1,337

Market share and total available market research data is also published by VLSI Research Inc. In May 2009, VLSI Research Inc. reported that our overall market share was 65% and that the total available market was $757.8 million for calendar year 2008.

We estimate our market share on a regular basis. We do so based on extensive information, including our own revenues, competitor orders and other key information such as tool move-ins at the fabs. Our market share estimates are usually closely aligned with those of Gartner Dataquest. Revenue recognition disparities do not normally cause significant swings in calculations of market share. However, we believe the significant decline in semiconductor capital equipment business in 2008 caused revenue recognition delays from 2007 shipments to distort 2008 market share metrics. Our information indicates that based on a competitor's delayed revenue recognition, a significant portion of their medium current tool shipments in 2007 was not recognized as revenue until 2008. As such, we believe our 2008 medium current market share, if normalized for these shipments, would be approximately flat from 2007 and our overall 2008 market share would be several percentage points higher than our overall 2007 market share. Our high current market share is a result of the industry shift to single wafer implanters at advanced technology nodes (65nm and below). We began developing single wafer high current tools in 1994 and are currently the industry leader. The increase in high energy market share is primarily related to customer mix in the total available market for high energy tools. Our position in the ultra high-dose market has resulted from the success of our plasma doping tool, known as the VIISta PLAD, which is used by memory manufacturers.

Revisions

During the quarter ended October 2, 2009, we identified certain instances dating back to fiscal year 1999 in which deferred income taxes and long-term tax liabilities were not properly recorded in our financial statements. These adjustments individually and in the aggregate were not material to our financial statements for all periods impacted. We have revised our historical financial statements to properly reflect these adjustments.

We recorded adjustments to increase deferred tax assets or reduce long-term tax liabilities and decrease income tax expense, resulting in an increase of net income, or reduction in net loss, by $1.8 million, $1.1 million and $2.2 million for the three months ended July 3, 2009 and fiscal years 2008 and 2007, respectively.

We will continue to make corresponding adjustments as described above to other prior periods as appropriate when future financial statements are filed with the Securities and Exchange Commission, or SEC.

Critical Accounting Policies and Significant Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles, or GAAP in the U.S. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On a continual basis, we evaluate our estimates, including those related to revenues, inventories, accounts receivable, long-lived assets, income taxes, warranty obligations, deferred revenue, post-retirement benefits, contingencies, stock-based compensation and foreign currencies. We operate in a highly cyclical and competitive industry that is influenced by a variety of diverse factors including, but not limited to, technological advances, product life cycles, customer and supplier lead times, and geographic and macroeconomic trends. Estimating product demand beyond a relatively short forecasting horizon is difficult and prone to forecasting error due to the cyclical nature and inherent lack of visibility in the industry. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. See also the factors discussed in the section titled "Risk Factors" in Item 1A.

We believe that the following sets forth our critical accounting policies used in the preparation of our consolidated financial statements.

Revenue Recognition

Product revenue includes established products, new products, upgrades and spare parts.

We recognize revenue from product sales upon shipment, provided title and risk of loss has passed to the customer, evidence of an arrangement exists, fees are contractually fixed or determinable, collectability is reasonably assured and there are no uncertainties regarding customer acceptance.

For established and new products, a portion of the total purchase price is typically not due until installation occurs and the customer accepts the product. For established products, the lesser of the amount allocated to the equipment or the contractual amount due upon delivery is recorded as product revenue upon delivery. The amount deferred is recognized as revenue upon customer acceptance. For new products, revenue allocated to the equipment is recognized upon customer acceptance. Spare parts and upgrade sales are recognized as revenue upon the later of delivery or the transfer of title and risk of loss to the customer.

We generally follow predetermined criteria for changing the classification of a new product to an established product. We generally recognize products as established after demonstrating success in achieving customer acceptance of the same tool type and specification, for the same or similar application. In most circumstances, once a new product achieves the predetermined criteria, the product is considered established. Furthermore, prior installation costs on the tool type can also influence the evaluation of tool maturity on a going forward basis.

Products are classified as established if the installation process and the post-delivery acceptance provisions are deemed routine, and there is a demonstrated history of achieving the predetermined established product criteria. The majority of products are designed and manufactured to meet contractual customer specifications, and established products must have been demonstrated to meet customer specifications before shipment.

Service revenue includes revenue from maintenance and service contracts, extended warranties, paid service and system installation services. Revenue related to maintenance and service contracts is recognized ratably over the

duration of the contracts. Extended warranty revenue is deferred and recognized ratably over the applicable warranty term. Revenue related to paid service is recorded when earned and revenue related to installation is recorded upon fulfillment of the service obligation and customer acceptance. It generally takes approximately three to six weeks for our technicians to complete the installation of our products and perform tests agreed to with customers. Certain customers formally document their acceptance of our products at this time. Other customers elect to perform additional internal testing prior to formal acceptance, and this process generally takes eight to twelve weeks.

Royalty and license revenue is recognized when contractual obligations are met, and in the case of royalties, upon receipt of a royalty report from the customer, evidence of an arrangement exists, fees are fixed or determinable and collection is reasonably assured.

Our transactions frequently include the sale of systems and services under multiple element arrangements. Revenue under these arrangements is allocated to all elements, except systems, based upon the fair value of those elements. All elements may not be delivered and recognized as revenue during the same period. In such cases, we defer the fair value of the undelivered element until that element is delivered. The amount allocated to installation labor is based upon hourly rates at the estimated time to complete the service. The fair value of all other elements is based upon the price charged when these elements, or similar elements, are sold separately and unaccompanied by other elements. The amount of revenue allocated to systems is done on a residual method basis. Under this method, the total value of the arrangement is allocated first to the undelivered elements based on their fair values, with the remainder being allocated to systems revenue. If fair value cannot be determined for any of the undelivered elements, the entire value of the arrangement is deferred.

Inventory and Purchase Order Commitments

We value our inventory at the lower of cost or market. The determination of lower of cost or market requires that we make significant assumptions about future demand for products and the transition to new product offerings from legacy products. We also provide for losses on those open purchase order commitments in which our estimated obligation to receive inventory under the commitments exceed expected production demand. These assumptions include, but are not limited to, future manufacturing schedules, customer demand, supplier lead time and technological and market obsolescence. Once inventory is written down and a new cost basis has been established, it is not written back up if demand increases. If market conditions are less favorable than those projected by management, additional inventory provisions may be required. If market conditions are more favorable than those projected by management, and specific inventory previously written down is subsequently sold, gross profit could benefit by the amount of the specific write-down to carrying value previously recorded. In the case of purchase order commitments, more favorable market conditions or successful negotiations with suppliers will result in a reduction of provisions in the period the excess purchase order commitments are reduced.

Valuation Allowance on Deferred Tax Assets and Income Tax Provision

We record a valuation allowance against deferred tax assets if it is more likely than not that a portion of the deferred tax asset will not be realized. On a quarterly basis, we evaluate both the positive and negative evidence bearing upon the realizability of our deferred tax assets. We consider future taxable income, ongoing prudent and feasible tax planning strategies, and the ability to utilize tax losses and credits in assessing the need for a valuation allowance. A valuation allowance related to certain state tax credit carryforwards has been recorded. Although, due to the global reorganization we have increased our utilization of state tax credits, management has concluded that it is more likely than not that a portion of these credits will not be utilized since historically the annual amount of state credits generated exceeds the amount of credits that can be used. We record a benefit to the tax provision and corresponding reduction in the valuation allowance related to the utilization of state tax credits generated in prior years. Should we determine that we are not able to realize all or part of our other deferred tax assets in the future, a valuation allowance would be required resulting in an expense recorded within

the provision for income taxes in the statement of operations in the period in which such determination was made. It is possible that the amount of the deferred tax asset considered realizable could be reduced in the near term if our forecast of future taxable income is reduced. Our effective tax rate is affected by levels of taxable income in domestic and foreign tax jurisdictions, U.S. tax credits generated and utilized for research and development expenditures, U.S. foreign income exclusion, investment tax credits and other tax incentives specific to domestic and foreign operations.

Product Warranties

We provide for the estimated cost of product warranties, the amount of which is based primarily upon historical information, at the time product revenue is recognized. While we engage in extensive product quality programs and processes including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is affected by product failure rates, utilization levels, material usage, service delivery costs incurred in correcting a product failure, and supplier warranties on parts delivered to us. Should actual product failure rates, utilization levels, material usage, service delivery costs incurred in correcting a product failure, or supplier warranties on parts differ from our estimates, revisions to the estimated warranty liability would be required.

Stock-based Compensation

Compensation cost for stock-based awards exchanged for employee and director services is measured at grant date and is based on the fair value of the award. The straight-line method is applied to all grants with service conditions, while the graded vesting method is applied to all grants with both service and performance conditions.

The choice of a valuation technique and the approach utilized to develop the underlying assumptions for that technique, involve significant judgments. These judgments reflect management's assessment of the most accurate method of valuing the stock options we issue based on historical experience, knowledge of current conditions, and beliefs of what could occur in the future given available information. Our judgments could change over time if the facts underlying these assumptions change, or as additional information becomes available. Any change in judgments could have a material impact on our financial statements. We believe that these estimates incorporate all relevant information and represent a reasonable approximation in light of the difficulties involved in valuing non-traded stock options.

Results of Operations

Fiscal Year

Our fiscal year is a 52- or 53-week period that ends on the Friday nearest September 30. Fiscal year 2009 was comprised of a 52-week period ended on October 2, 2009. Fiscal year 2008 was comprised of a 53-week period ended on October 3, 2008. Fiscal year 2007 was comprised of a 52-week period ended on September 28, 2007.

Fiscal Year 2009 Compared to Fiscal Year 2008 and

Fiscal Year 2008 Compared to Fiscal Year 2007

Revenue

The following table sets forth revenue by revenue stream and territory for
fiscal years 2009, 2008 and 2007:



                                                                     Fiscal Year 2008 to          Fiscal Year 2007 to
                                         Fiscal Year                  Fiscal Year 2009             Fiscal Year 2008
                                                                                   Percent                      Percent
                               2009        2008         2007         Change        Change         Change        Change
                                                               (Amounts in thousands)
Revenue
Product                      $ 309,230   $ 752,629   $   961,329   $ (443,399 )        -59 %    $ (208,700 )        -22 %
Service                         52,764      81,371        86,062      (28,607 )        -35 %        (4,691 )         -5 %
Royalty and license                 87          61         7,473           26           43 %        (7,412 )        -99 %

Revenue                      $ 362,081   $ 834,061   $ 1,054,864   $ (471,980 )        -57 %    $ (220,803 )        -21 %

Revenue by territory:
Asia Pacific                 $ 227,108   $ 585,543   $   749,382   $ (358,435 )        -61 %    $ (163,839 )        -22 %
North America                  103,257     185,883       232,141      (82,626 )        -44 %       (46,258 )        -20 %
Europe                          31,716      62,635        73,341      (30,919 )        -49 %       (10,706 )        -15 %

Revenue                      $ 362,081   $ 834,061   $ 1,054,864   $ (471,980 )        -57 %    $ (220,803 )        -21 %

Product

Our product sales decreased $443.4 million, or 59%, during fiscal year 2009 as compared to fiscal year 2008. Overcapacity in the memory market, along with the global credit crisis and the decline in end-user demand for semiconductors, has caused our customers to significantly decrease their spending for our products. On a unit basis, the number of tools recorded in revenue declined 62% during fiscal year 2009 as compared to fiscal year 2008. In addition, revenue from parts and upgrades sales during fiscal year 2009 decreased 46% as compared to fiscal year 2008, due to lower utilization levels at most customers.

In fiscal year 2008, our product sales decreased $208.7 million, or 22%, from fiscal year 2007, due to lower tool sales to memory customers in Asia Pacific. On a unit basis, the number of tools recorded in revenue in fiscal year 2008 decreased 33% as compared to fiscal year 2007. Despite the decline in tool sales, revenue from parts and upgrades sales increased 8% in the same period, primarily due to a higher installed base of tools.

Service

Service revenue decreased 35% in fiscal year 2009 as compared to fiscal year 2008, primarily related to a decrease in installation revenue due to fewer tool shipments and a decrease in service contract revenue as a result of customer fab closures and lower utilization levels. Service revenue decreased 5% in fiscal year 2008 as compared to fiscal year 2007, primarily as a result of a decrease in installation revenue on account of decreased tool sales. Generally, installation revenue is influenced by shipment volume of systems, product mix, customer mix, timing of customer acceptance and the fair value of installations. As products mature and the installation requires less effort to complete, the fair value of installation revenue per system is reduced, which reduces installation revenue per tool.

Royalty and License

In fiscal years 2009 and 2008, we recorded less than $0.1 million in royalty and license revenues, respectively, as compared to $7.5 million in fiscal year 2007. Until March 2007, Applied Materials was required by a royalty agreement to make quarterly unit-based royalties payments to us on sales of certain products within the scope of the agreement.

Revenue by Territory

The Asia Pacific region has historically accounted for a significant percentage of our revenue. The decrease in revenue from this region in fiscal year 2009 as compared to fiscal year 2008 is due to the worldwide decrease in semiconductor manufacturing, particularly among memory and foundry customers in the Asia Pacific region. The decrease in revenue from the Asia Pacific region in fiscal year 2008, as compared to fiscal year 2007, is primarily due to substantial capacity additions by memory customers in fiscal year 2007. Revenue from North America decreased in fiscal year 2009 as compared to fiscal year 2008, and from fiscal year 2008 as compared to fiscal year 2007, primarily on account of a reduction in sales to both memory and logic customers. The most significant driver of change across all regions for the same periods is the substantial drop in memory business beginning in fiscal year 2008.

Customers

Revenue from our ten largest customers in fiscal years 2009, 2008 and 2007 accounted for approximately 73%, 74% and 72% of total revenue, respectively. In fiscal year 2009, revenue from Intel and tsmc accounted for 21% and 16%, respectively, of our total revenue. We expect that sales of our products to relatively few customers will continue to account for a high percentage of our revenue for the foreseeable future. In fiscal year 2008, revenue from Samsung and Intel accounted for 16% and 13%, respectively of our total revenue. In fiscal year 2007, revenue from Samsung accounted for 17% of our total revenue.

In addition, our accounts receivable is comprised of relatively few customer accounts. As of fiscal year end 2009, two customers accounted for 23% and 21% of the accounts receivable balance. As of fiscal year end 2008, four customers accounted for 16%, 12%, 11% and 10% of the total accounts receivable balance.

Shipment Mix

Our tools are used by logic, memory and foundry manufacturers of integrated circuits. Logic manufacturers make chips that process information, while memory manufacturers make chips that store information. Both memory and logic manufacturers are owned by the companies that design the chips. Foundry manufacturers are contractors that take chip designs from other companies and make the chips for them. For several years, up to and including 2007, the demand for memory chips has outstripped logic due to the growth in memory intensive applications such as cameras, phones and MP3 players. We believe that substantial capacity additions by memory customers through fiscal year 2007 led . . .