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SMT & Inspection | May 12, 2008

Orbotech post net income fall of 34%

Net income for Q1/08 was $3.7 million, compared to a net income of $5.6 million Q1/07. Revenues for Q1/08 totalled $100.5 million, compared to $103.6 million recorded in Q4/07 and the $86.1 million recorded in Q1/07.
Sales of equipment to the printed circuit board (“PCB”) industry relating to bare PCBs were $36.5 million in Q1/08, compared to $50.0 million in Q4/07 and $35.5 million in Q1/07. Sales of flat panel display (“FPD”) inspection equipment were $20.4 million, compared to $10.6 million in Q4/07 and $19.1 million in Q1/07.

Sales of equipment to the PCB industry relating to assembled PCBs were $8.1 million, compared to $8.3 million in Q4/07 and $6.8 million in Q1/07. Sales of automatic check reading products were $2.0 million, compared to $3.6 million in Q4/07 and $2.4 million in Q1/07.

Sales of medical imaging equipment in Q1/08 were $7.3 million, compared to $6.1 million in Q4/07 (the Company acquired this business in August 2007). In addition, service revenue for Q1/08 was $25.5 million, compared to $25.0 million in Q4/07 and $22.2 million in Q1/07.

The Company completed the quarter with cash, cash equivalents and marketable securities of approximately $202 million, compared with approximately $206 million at the end of 2007. Non-operating disbursements totalled approximately $2.7 million, comprised mainly of capital expenditures. The Company’s marketable securities currently include approximately $33 million of auction rate securities which are tied to student loans and which have experienced a lack of liquidity during the last three months. However, $5.5 million of these securities were recently tendered at par and will be redeemed later this month. The Company believes that there is no credit risk as to the remaining $27.5 million.

The weakness in the United States dollar vis-à-vis the Sheqel adversely impacted net income during the first quarter of 2008 by approximately four cents per share compared with the fourth quarter of 2007. If the Sheqel-Dollar exchange rate remains at current levels, it is expected to result in a similar adverse impact on net income in the second quarter of 2008.

The Company believes that the decline in revenues from its PCB business during the first quarter resulted from the currently prevailing global economic uncertainty, particularly in North America, and this may continue to impact PCB revenues in the near term. Nevertheless, the long-term success of Orbotech’s Discovery PCB-AOI system has reinforced the Company’s overall leadership position in the PCB industry.

The increase in revenues from sales of FPD products reflects an initial increase in capital investments by LCD manufacturers, resulting from a strengthening demand for panels, a trend which is expected to continue throughout 2008 and into 2009. The Company had another strong quarter in bookings and finished the quarter with a record backlog.

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