VEECO INSTRUMENTS INC - Annual Report: 2009 (Form 10-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K


(Mark One)
ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .

Commission file number 0-16244

VEECO INSTRUMENTS INC.
(Exact Name of Registrant as Specified in Its Charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)		11-2989601 (I.R.S. Employer Identification No.)
Terminal Drive Plainview, New York (Address of Principal Executive Offices)		11803 (Zip Code)

Registrant's telephone number, including area code (516) 677-0200

Website: www.veeco.com

Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.01 per share

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes o No o

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by references in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer o		Accelerated filer ý		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No

The aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price of the common stock on June 30, 2009 as reported on The Nasdaq National Market, was $393,859,434. Shares of common stock held by each officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded from this computation in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

At February 22, 2010, the Registrant had 39,929,515 outstanding shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on May 14, 2010 are incorporated by reference into Part III of this Annual Report on Form 10-K.

SAFE HARBOR STATEMENT

This Annual Report on Form 10-K (the "Report") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Discussions containing such forward-looking statements may be found in Items 1, 3, 7, and 7A hereof, as well as within this Report generally. In addition, when used in this Report, the words "believes," "anticipates," "expects," "estimates," "plans," "intends," and similar expressions are intended to identify forward-looking statements. All forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from projected results. These risks and uncertainties include, without limitation, the following:

•: Our failure to successfully implement outsourcing activities or failure of our outsourcing partners to perform as anticipated could adversely affect our results of operations and our ability to realize the benefits of the recent increase in MOCVD order volume;
•: Manufacturing interruptions or delays could affect our ability to meet customer demand, while the failure to estimate customer demand accurately could result in excess or obsolete inventory and/or liabilities to our suppliers for products no longer needed;
•: We rely on a limited number of suppliers;
•: Our backlog is subject to customer cancellation or modification and such cancellation could result in decreased sales and increased provisions for excess and obsolete inventory and/or liabilities to our suppliers for products no longer needed;
•: Our sales to HB LED and data storage manufacturers are highly dependent on these manufacturers' sales for consumer electronics applications, which can experience significant volatility due to seasonal and other factors. This could materially adversely impact our future results of operations;
•: Negative worldwide economic conditions could result in a decrease in our net sales and an increase in our operating costs, which could adversely affect our business and operating results;
•: We are exposed to the risks of operating a global business, including the need to obtain export licenses for certain of our shipments;
•: We are exposed to risks associated with our entrance into the emerging solar industry;
•: The timing of our orders, shipments, and revenue recognition may cause our quarterly operating results to fluctuate significantly;
•: We operate in industries characterized by rapid technological change;
•: We face significant competition;
•: We depend on a limited number of customers that operate in highly concentrated industries;
•: The cyclicality of the industries we serve directly affects our business;
•: Our sales cycle is long and unpredictable;
•: Our inability to attract, retain, and motivate key employees could have a material adverse effect on our business;
•: The price of our common shares may be volatile and could decline significantly;
•: We are subject to foreign currency exchange risks;
•: The enforcement and protection of our intellectual property rights may be expensive and could divert our valuable resources;

•: We may be subject to claims of intellectual property infringement by others;
•: Our acquisition strategy subjects us to risks associated with evaluating and pursuing these opportunities and integrating these businesses;
•: We may be required to take additional impairment charges for goodwill and indefinite-lived intangible assets or definite-lived intangible and long-lived assets;
•: Changes in accounting pronouncements or taxation rules or practices may adversely affect our financial results;
•: We are subject to the internal control evaluations and attestation requirements of Section 404 of the Sarbanes-Oxley Act;
•: We are subject to risks of non-compliance with environmental, health and safety regulations;
•: We have significant operations in California and other locations which could be materially and adversely impacted, in the event of a natural disaster or other significant disruption;
•: We have adopted certain measures that may have anti-takeover effects which may make an acquisition of our Company by another company more difficult; and
•: The matters set forth in this Report generally, including the risk factors set forth in "Item 1A. Risk Factors."

Consequently, such forward-looking statements should be regarded solely as the Company's current plans, estimates, and beliefs. The Company does not undertake any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements.

Item 1. Business

The Company

Veeco Instruments Inc. (together with its consolidated subsidiaries, "Veeco," the "Company" or "we") designs, manufactures, markets and services enabling solutions for customers in the high brightness light emitting diode ("HB LED"), solar, data storage, scientific research, semiconductor, and industrial markets. We have leading technology positions in our three business segments: Light Emitting Diode ("LED") & Solar Process Equipment, Data Storage Process Equipment, and Metrology.

In our LED & Solar segment, we design and manufacture metal organic chemical vapor deposition ("MOCVD") systems that are used to make HB LEDs or solar cells made of III-V compound semiconductors. Also within this segment we sell molecular beam epitaxy ("MBE") systems which are used in various applications including alternative energy (LED and Solar), power devices and in broad scientific research. We also make thermal evaporation sources and a line of web and glass deposition systems used to create copper, indium, gallium, selenide ("CIGS") thin film solar cells.

In our Data Storage segment, we design and manufacture equipment used in the production of thin film magnetic heads ("TFMHs") that read and write data on hard disk drives. Our technologies include equipment for "front and back-end" process steps such as ion beam etch, ion beam deposition, diamond-like carbon, physical vapor deposition, chemical vapor deposition, and dicing and slicing systems.

In our Metrology segment, we design and manufacture atomic force microscopes ("AFMs"), scanning probe microscopes ("SPMs"), stylus profilers, and fast 3D optical microscopes, used to provide critical surface measurements in research and production environments. This broad line of products is used in universities, research facilities and scientific centers worldwide. In production environments (such as microelectronics and solar), precision manufacturing industries,(such as medical device manufacturing, automotive and aerospace) and other related industries, our metrology instruments enable customers to monitor their products throughout the manufacturing process to improve yields, reduce costs, and improve product quality.

We serve our worldwide customers through our global sales and service organization located throughout North America, Europe, Japan, and Asia Pacific. We have product development and marketing, engineering and manufacturing facilities located in New York, Arizona, California, Colorado, Minnesota, Massachusetts and New Jersey.

Veeco was organized as a Delaware corporation in 1989.

Our Strategy

Our strategy for growth and improved profitability focuses on the following key activities:

•: Focusing our efforts on those technologies in which we have a leading market share, providing differentiated technology solutions to address customers' next generation product development roadmaps;
•: Leveraging our research and development spending into end markets that we believe offer high-growth opportunities, such as our LED & Solar segment;
•: Improving our operational efficiency in each segment through better supply chain management, best cost manufacturing and other activities to lower costs and increase profitability, and;
•: Developing strategic relationships with worldwide technology leaders and offering these customers high-quality, differentiated products that support their cost of ownership requirements as well as service and applications support in order to improve their time-to-market on leading edge devices.

Business Overview and Industry Trends

General Introduction: Our thin film deposition, etch, measurement and other technologies are applicable to the creation of a broad range of microelectronic components, including HB LEDs, solar cells, thin film magnetic heads and semiconductor devices. Our customers who manufacture these devices continue to invest in new technology equipment in order to advance their next generation products and deliver more efficient and cost effective technology solutions.

Starting at the end of 2008 and continuing through the beginning of 2009, the global economic downturn, constrained financing environment and a slowdown in capital spending on equipment impacted most of our end markets and customers. The early part of 2009 was extremely challenging for us in light of these industry conditions and we accelerated our restructuring activities, particularly facility consolidation and additional outsourced manufacturing initiatives. By mid-2009 we experienced a rapid improvement in business conditions, due to our exposure to high-growth end markets such as LED & Solar, where we believe we are well placed with market leading technologies that drive our customers' future product development roadmaps.

The following is a review of our three reportable segments and the multi-year technology trends that impact each.

LED & Solar Business Overview and Trends: We are a leading supplier of process equipment solutions used to create HB LEDs and solar cells. We are the only supplier of both MOCVD and MBE systems, the two key epitaxial deposition technologies used for these applications. MOCVD and MBE technologies are used to grow compound semiconductor materials (such as GaAs (gallium arsenide), GaN (gallium nitride), As/P (arsenic phosphide) and InP (indium phosphide)) at the atomic scale. Epitaxy is the critical first step in compound semiconductor wafer fabrication and is considered to be the highest value added process, ultimately determining device functionality and performance.

Strategies Unlimited, an LED industry research organization, forecasts that the market for HB LEDs will grow from $4.2 billion in 2007 to over $14.0 billion in 2013, for a compound annual growth rate ("CAGR") of 32%. We believe that the HB LED market, while cyclical, represents a high-growth opportunity for us due to the expanding applications for HB LEDs, such as backlighting for large screen flat panel TVs (LCD—liquid crystal displays), laptop computers, automotive applications, and general illumination. In 2009 the LED industry experienced significant growth as LEDs penetrated laptop and television backlighting applications. In fact, Strategies Unlimited forecasts that LEDs for these applications will grow 122% from 2009 through 2013. In order to gain market share in light of this growth opportunity, we have introduced several generations of MOCVD tools, most recently our TurboDisc® K-Series™ MOCVD systems. By introducing new systems, we are focused on delivering better uniformity and repeatability, which helps our customers to make HB LEDs of consistent quality. We also intend to continue to invest heavily in research and development in order to deliver more advanced MOCVD solutions to our customers.

A related application for us is in the solar market, since the same MOCVD tool that is critical to the LED manufacturing process can also be used to manufacture high-efficiency triple junction solar cells. Veeco has also identified the thin film solar cell market as offering significant growth opportunity to the Company. The global energy dilemma is resulting in a significant amount of new research and spending into solar technologies as an alternative energy solution since it is non-polluting and has the potential to supply the world with high energy efficiency at low cost. While many of today's solar panels are based upon older silicon technologies, thin film CIGS solar cells offer the potential for lower manufacturing costs, and have the highest efficiency of the thin film technologies. According to a May 2008 report presented by the National Renewable Energy Labs ("NREL"), future CIGS Panel Photovoltaic ("PV") panels are projected to be "the most competitive thin film technology" based upon module efficiency and relative cost basis. CIGS solar panels have broad-based end market applications for solar farms, integrated building PV devices, rooftop grids and portable devices.

Since PV manufacturers often build their own equipment, there is a market opportunity emerging for equipment suppliers such as Veeco. In its October 2009 report, Greentech Media forecasted that the total available market for CIGS deposition systems would be greater than $850 million by 2012, a 74% compounded annual growth rate from 2008. To capitalize on this opportunity, in 2008 we purchased Mill Lane Engineering, a manufacturer of web deposition technology, to make flexible CIGS solar cells, and in 2009 we significantly expanded our product line to create a "best of breed" line of deposition systems that can deposit materials on flexible (stainless steel) or rigid (glass) substrates. Today Veeco supplies thermal evaporation components to over 50% of CIGS companies worldwide and has begun to penetrate CIGS customers with our deposition system solutions. We are increasing our research and development spending in CIGS technology since we believe it offers a significant growth opportunity over the next several years.

Our LED & Solar segment now represents our largest segment.

Data Storage Business Overview and Trends: Worldwide storage demand continues to increase, driven by proliferation of laptop and netbook PC's, intelligent internet storage, e-mail, external storage devices, and new consumer applications (e.g. digital video recorders) now reaching higher volume. While much has been written about the competition hard disk drives ("HDDs") face from flash memory, we believe that HDDs will continue to provide the best value for mass storage and will remain at the forefront of large capacity storage applications. In fact, the use of disk drives in many types of consumer applications has resulted in growth in the number of hard drive units shipped, which is expected to continue. According to data storage research firm TrendFocus's February 2010 report, consumer electronic applications of HDDs are forecasted to grow at a CAGR of 11.9% from 2010 to 2014.

While technology change continues in data storage, the industry is going through a period of maturation, including vertical integration and consolidation, which has led to decreased capital investment. As a result of this consolidation and evolving customer landscape, we have taken actions to right-size our data storage businesses and product lines. We refocused our research and development efforts, discontinued several product lines, and in 2009 completed the consolidation of several manufacturing facilities. We continue to invest in research and development for next generation products for the data storage industry, and believe we are well-aligned to customer's technology requirements and demand for lower cost of ownership tools.

Metrology Business Overview and Industry Trends: Our Metrology segment sells its products to a broad range of industry and research customers. This business has often tracked to the growth of the economy and Gross Domestic Product, as instruments are used in a wide range of industrial applications. A meaningful trend in the research industry is an increased requirement for instrumentation capable of measuring materials and their associated properties at the nanoscale. The ability to design and control material structures from the atomic to the micron scale is fundamentally important to the creation of new materials and structures which have potential to reduce emissions, increase manufacturing yields and contribute to a longer and improved quality of life. Nanoscience continues to receive significant funding from the U.S. and other governments as well as from industry.

During the last two years we have refocused our Metrology business with new products that expand functionality and performance, which we believe has lead to market share expansion. Specifically, our Dimension® Icon®, Bioscope® Catalyst® and recently released MulitMode® 8 with ScanAsyst^TM AFMs are facilitating enhanced research in such areas as security, energy and biotechnology. We also believe that long-term growth opportunities exist in precision manufacturing segments such as medical device manufacturing, automotive, aerospace, clean energy (HB LED and Solar), and microelectronics. Our recently released large sample White-Light Interferometer, the NPFLEX^TM and the NT9080^TM small sample 3D microscope address the needs of these industries as they transition from traditional 2D metrology to a more comprehensive and enhanced 3D paradigm.

Metrology is also a key enabling technology in high tech manufacturing industries such as semiconductor and data storage. We have placed more than 450 fully automated AFM systems into these industries. These completely automated systems are used in-line by manufacturers of semiconductor chips and data storage TFMHs in their fabrication facilities. We believe that we are positioned to meet AFM metrology requirements of these industries as they emerge from a contraction cycle and enter a potential growth cycle.

Our Products

We have three business segments, LED & Solar Process Equipment, Data Storage Process Equipment, and Metrology. Net sales for these business segments is shown below for the years indicated:

		Year ended December 31,

		2009			2008			2007
		(Dollars in millions)
LED & Solar Process Equipment		$	205.1		$	165.8		$	115.9
	% of net sales		54.0	%		37.4	%		28.8	%
Data Storage Process Equipment		$	77.3		$	149.1		$	136.1
	% of net sales		20.3	%		33.7	%		33.8	%
Metrology		$	97.7		$	127.9		$	150.5
	% of net sales		25.7	%		28.9	%		37.4	%
Total net sales		$	380.1		$	442.8		$	402.5

See Note 10 to our Consolidated Financial Statements for additional information regarding our reportable segments and sales by geographic location.

LED & Solar Process Equipment

Metal Organic Chemical Vapor Deposition Systems: We are one of the world's leading suppliers of MOCVD technology. MOCVD production systems are used to make GaN-based devices, (green and blue HB LEDs) and As/P-based devices (red, orange, and yellow HB LEDs), which are used today in television and laptop backlighting, general illumination, large area signage and specialty illumination. Our As/P MOCVD Systems also are used to make high-efficiency concentrator solar cells.

Molecular Beam Epitaxy Systems: MBE is the process of precisely depositing epitaxially aligned atomically thin crystal layers, or epilayers, of elemental materials onto a substrate in an ultra-high vacuum environment. For many compound semiconductors, MBE is the critical first step of the fabrication process, ultimately determining device functionality and performance. We provide a broad array of MBE components and systems for research and production applications and, in 2007, introduced a new line of thermal evaporation sources for the solar industry.

Web and Glass Coaters for Flexible Solar Cells: In the second quarter of 2008 we purchased Mill Lane Engineering, a manufacturer of web deposition equipment used to make CIGS solar cells. We have since expanded our product line to include "best of breed" solutions that perform 75% of the CIGS deposition steps on both flexible and rigid (glass) substrates. We believe that our FastFlex™ and FastLine™ systems offer high throughput and excellent performance for flexible thin film solar cell production, contributing to a lower cost of ownership for our customers.

Data Storage Process Equipment

Ion Beam Deposition ("IBD") Systems: Our NEXUS® IBD systems utilize ion beam technology to deposit precise layers of thin films and may be included on our cluster system platform to allow either parallel or sequential etch/deposition processes. IBD systems deposit high purity thin film layers and

provide maximum uniformity and repeatability. In addition to IBD systems, we provide a broad array of ion beam sources.

Ion Beam Etch ("IBE") Systems: Our NEXUS IBE systems, which etch precise, complex features for use primarily by data storage and telecommunications device manufacturers in the fabrication of discrete and integrated microelectronic devices.

Physical Vapor Deposition ("PVD") Systems: Our NEXUS PVD systems offer manufacturers a highly flexible deposition platform for developing next-generation data storage applications.

Diamond-Like Carbon ("DLC") Deposition Systems: Our DLC deposition systems deposit protective coatings on advanced TFMHs.

Chemical Vapor Deposition ("CVD") Systems: Our NEXUS CVD systems, introduced to the market in 2008, deposit conformal films for advanced TFMH applications.

Precision Lapping, Slicing, and Dicing Systems: Our Optium® products generally are used in "back-end" applications in a data storage fab where TFMHs or "sliders" are fabricated. This equipment includes lapping tools, which enable precise material removal within three nanometers, which is necessary for next generation TFMHs. We also manufacture instruments that slice and dice wafers into rowbars and TFMHs.

Metrology

Our metrology product line includes atomic force/scanning probe microscopes, optical metrology tools, and stylus profilers for a wide range of applications in research and industry.

Atomic Force/Scanning Probe Microscopes: We have the world's most comprehensive product portfolio of research AFMs and SPMs, used in leading edge nano-scale materials research, in HB LED, solar, biological and nanotechnology applications. Our NanoScope® and Dimension products lead the industry and are synonymous with leading-edge performance and are widely used by leading universities and corporate research centers worldwide. Building upon our long-standing leadership position in AFM technology we continue to develop new products for production and research applications. We also produce a broad range of automated AFM/SPM products designed for data storage, semiconductor and research and other industrial applications.

The atomic force microscope investigates the sample surface directly using a probe consisting of a very sharp tip, or probe, mounted on a microscopic spring arm (a cantilever). The interaction of the probe with the surface is detected by measuring deflections of the cantilever with an optical beam system. AFMs make these measurements on almost any surface; in air, vacuum or under fluids; and with minimal sample preparation.

Stylus Profilers: Stylus profilers are used to produce cross-sectional representations and/or quantitative measurements, which are displayed on a video monitor. Our Dektak® stylus profiler systems utilize a precision translation stage which creates relative motion between the sample and a diamond tipped stylus. Stylus profilers are widely used for height, width, pitch, and roughness measurements of features on semiconductor devices, magnetic and optical storage media (such as hard drives), flat panel displays, and hybrid circuits.

Optical Metrology Products: Substantially all of our optical metrology instruments are designed to make non-contact surface measurements using either interferometry or a spinning disc confocal architecture. These processes involve the use of either white light or laser sources to measure surface roughness and shape. Our White-Light Interometers create interference patterns from the optical path difference between the test surface and a reference surface. Using a combination of phase shifting interferometry and vertical scanning interferometry, these instruments are designed to rapidly and

precisely measure and characterize a range of surface sizes and shapes. Our series of confocal microscopes employ a spinning disc design which facilitates faster image acquisition, a limitation of traditional laser-based scanning confocal microscopes. Veeco's microscopes can address a wide gamut of applications from angstrom to micron features.

Service and Sales

We sell our products and services worldwide through various strategically located sales and service facilities in the U.S., Europe, Asia Pacific, and Japan, and we believe that our customer service organization is a significant factor in our success. We provide service and support on a warranty, service contract or an individual service-call basis. We offer enhanced warranty coverage and services, including preventative maintenance plans, on-call and on-site service plans and other comprehensive service arrangements, product and application training, consultation services, and a 24-hour hotline service for certain products. We believe that offering timely support creates stronger relationships with customers and provides us with a significant competitive advantage. Revenues from the sale of parts, service, and support represented approximately 16%, 19%, and 21% of our net sales for the years ended December 31, 2009, 2008, and 2007, respectively. Parts sales represented approximately 11%, 14%, and 17% of our net sales for those periods, respectively, and service and support sales were 5%, 5%, and 4%, respectively.

Customers

We sell our products to many of the world's major HB LED, solar, data storage and semiconductor manufacturers, and to customers in other industries, research centers, and universities. We rely on certain principal customers for a significant portion of our sales. Sales to LG Electronics, Inc. accounted more than 10% of Veeco's total net sales in 2009 and sales to Seagate Technology, Inc. accounted for 10% or more of Veeco's total net sales in 2008 and 2007. If any principal customer discontinues its relationship with us or suffers economic difficulties, our business, prospects, financial condition, and operating results could be materially and adversely affected.

Research and Development

We believe that continued and timely development of new products and enhancements to existing products are necessary to maintain our competitive position. We work collaboratively with our customers to help ensure our technology and product roadmaps are aligned with customer requirements. Our research and development programs are organized by product line and new or improved products have been introduced into each of our product lines in each of the past three years.

Our research and development expenses were approximately $57.4 million, $60.4 million, and $61.2 million, or approximately 15.1%, 13.6%, and 15.2% of net sales for the years ended December 31, 2009, 2008, and 2007, respectively. These expenses consisted primarily of salaries, project material, and other product development and enhancement costs.

Suppliers

We currently outsource, and plan to increase the outsourcing of, certain functions to third parties, including the manufacture of all or substantially all of our new MOCVD systems, data storage process equipment systems, solar deposition systems, ion sources and certain components in our metrology products. We primarily rely on several suppliers for the manufacturing of these systems. We plan to maintain internal manufacturing capability for these systems at least until such time as we have qualified one or more alternate suppliers to perform this manufacturing. The failure of our present suppliers to meet their contractual obligations under our supply arrangements and our inability to make

alternative arrangements or resume the manufacture of these systems ourselves could have a material adverse effect on our revenues, profitability, cash flows, and relationships with our customers.

In addition, certain of the components and sub-assemblies included in our products are obtained from a single source or a limited group of suppliers. Our inability to develop alternative sources, if necessary, could result in a prolonged interruption in supply or a significant increase in the price of one or more components, which could adversely affect our operating results.

Product Development and Marketing

Our principal activities, which consist of product development, integration, test operations and assembly, are organized by product and take place at our facilities in Plainview and Clifton Park, New York; Santa Barbara and Camarillo, California; Tucson, Arizona; Ft. Collins, Colorado; Somerset, New Jersey; St. Paul, Minnesota; and Lowell, Massachusetts.

Product Organization

Our sales, marketing, manufacturing and research and development functions are organized by product families. We believe that this organizational structure allows each product family manager to more closely monitor the products for which he is responsible, resulting in more efficient sales, marketing, manufacturing, and research and development. We emphasize customer responsiveness, customer service, high-quality products, and an interactive management style. By implementing these management philosophies, we believe that we have increased our competitiveness and are well-positioned for future growth.

Backlog

Our backlog increased to $402.0 million at December 31, 2009 from $147.2 million at December 31, 2008. During the year ended December 31, 2009, we experienced net backlog adjustments of approximately $4.5 million, consisting of $3.8 million for order cancellations and $0.7 million of adjustments related to foreign currency translation.

Our backlog consists of product orders for which we received a firm purchase order, a customer-confirmed shipment date within twelve months, and an appropriate deposit, where required.

Competition

In each of the markets that we serve, we face substantial competition from established competitors, some of which have greater financial, engineering, manufacturing, and marketing resources than us, as well as from smaller competitors. In addition, many of our products face competition from alternative technologies, some of which are more established than those used in our products. Significant factors for customer selection of metrology and process equipment tools include system performance, accuracy, repeatability, ease of use, reliability, cost of ownership, and technical service and support. We believe that we are competitive based on the customer selection factors in each market we serve. None of our competitors compete with us across all of our product lines.

We compete with process equipment manufacturers such as Aixtron, Anelva, Applied Materials, Centrotherm, Nippon Sanso, Oerlikon, and Riber. We compete with metrology product manufacturers such as Agilent, Hitachi, KLA-Tencor, Seiko, Zygo and a variety of small manufacturers.

Intellectual Property

Our success depends in part on our proprietary technology. Although we attempt to protect our intellectual property rights through patents, copyrights, trade secrets, and other measures, there can be

no assurance that we will be able to protect our technology adequately or that competitors will not be able to develop similar technology independently.

We have patents and exclusive and non-exclusive licenses to patents owned by others covering certain of our products, which we believe provide us with a competitive advantage. We have a policy of seeking patents on inventions concerning new products and improvements as part of our ongoing research, development, and manufacturing activities. We believe that there is no single patent or exclusive or non-exclusive license to patents owned by others that is critical to our operations, as the success of our business depends primarily on the technical expertise, innovation, customer satisfaction, and experience of our employees.

We also rely upon trade secret protection for our confidential and propriety information. There can be no assurance that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or that we can meaningfully protect our trade secrets. In addition, we cannot be certain that we will not be sued by third parties alleging that we have infringed their patents or other intellectual property rights. If any third party sues us, our business, results of operations or financial condition could be materially adversely affected.

Employees

At December 31, 2009, we had 1,005 employees, of which there were 221 in manufacturing and testing, 146 in sales and marketing, 152 in service, 42 in product support, 302 in engineering, research, and development, and 142 in information technology, general administration and finance. The success of our future operations depends in large part on our ability to recruit and retain engineers, technicians, and other highly-skilled professionals who are in considerable demand. We feel that we have adequate programs in place to attract, motivate, and retain our employees, and we plan to monitor industry practices to make sure that our compensation and employee benefits remain competitive. However, there can be no assurance that we will be successful in recruiting or retaining key personnel. We believe that our relations with our employees are good.

Available Information

We file annual, quarterly, and current reports, information statements, and other information with the Securities and Exchange Commission (the "SEC"). The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

Internet Address

We maintain a website where additional information concerning our business and various upcoming events can be found. The address of our website is www.veeco.com. We provide a link on our website, under Investors—Financial Info—SEC Filings, through which investors can access our filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports. These filings are posted to our website, as soon as reasonably practicable after we electronically file such material with the SEC.

Item 1A. Risk Factors

Risk Factors That May Impact Future Results

In addition to the other information set forth herein, the following risk factors should be carefully considered by shareholders of and potential investors in the Company.

Our failure to successfully implement outsourcing activities or failure of our outsourcing partners to perform as anticipated could adversely affect our results of operations and our ability to realize the benefits of the recent increase in MOCVD order volume.

To better align our costs with market conditions, increase the percentage of variable costs relative to total costs and to increase productivity and operational efficiency, we have outsourced certain functions to third parties, including the manufacture of all or substantially all of our new MOCVD systems, data storage process equipment systems, solar deposition systems, ion sources and certain components of our Metrology products. In addition, to supplement our current staffing and our planned hiring to meet the recent increase in MOCVD orders, we are planning to use technical staffing firms and contractors to assist with certain aspects of MOCVD system installation and testing at customer sites. We are relying heavily on our outsourcing partners to successfully execute the ramp in MOCVD system production, to fill the substantial increase in recent MOCVD orders. Dependence on contract manufacturing and outsourcing may adversely affect our ability to satisfy the recent strong demand for our MOCVD equipment and to bring other new products to market. If our outsourcing partners do not perform successfully, our results of operations may be adversely affected and we could suffer damage to our reputation. Although we attempt to select reputable providers, it is possible that one or more of these providers could fail to perform as we expect. In addition, the expanded role of third party providers has required and will continue to require us to implement changes to our existing operations and adopt new procedures and processes for retaining and managing these providers in order to realize operational efficiencies, assure quality, and protect our intellectual property. If we do not timely and effectively develop and implement our outsourcing strategy or if third party providers do not perform as anticipated, we may not realize the benefits of the recent increase in MOCVD order volume or gross margin or productivity improvements and we may experience operational difficulties, increased costs, manufacturing and/or installation interruptions or delays, inefficiencies in the structure and/or operation of our supply chain, loss of intellectual property rights, quality issues, increased product time-to-market and/or inefficient allocation of human resources, any or all of which could materially and adversely affect our business, financial condition and results of operations.

Manufacturing interruptions or delays could affect our ability to meet customer demand, while the failure to estimate customer demand accurately could result in excess or obsolete inventory and\or liabilities to our suppliers for products no longer needed.

Our business depends on our ability to supply equipment, services and related products that meet the rapidly changing technical and volume requirements of our customers, which depends in part on the timely delivery of parts, components and subassemblies (collectively, parts) from suppliers. Some key parts may be subject to long lead-times and/or obtainable only from a single supplier or limited group of suppliers, and some sourcing or subassembly is provided by suppliers located in countries other than the United States. We may experience significant interruptions of our manufacturing operations, delays in our ability to deliver products or services, increased costs or customer order cancellations as a result of:

•: the failure or inability of suppliers to timely deliver quality parts;
•: volatility in the availability and cost of materials;
•: difficulties or delays in obtaining required import or export approvals;

•: information technology or infrastructure failures;
•: natural disasters (such as earthquakes, floods or storms); or
•: other causes (such as regional economic downturns, pandemics, political instability, terrorism, or acts of war) could result in delayed deliveries, manufacturing inefficiencies, increased costs or order cancellations.

In addition, our need to rapidly increase our business and manufacturing capacity to meet unanticipated increases in demand may be limited by working capital constraints of our suppliers and may exacerbate any interruptions in our manufacturing operations and supply chain and the associated effect on our working capital. Moreover, if actual demand for our products is different than expected, we may purchase more/fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts. The volatility of demand for capital equipment increases capital, technical and other risks for companies in the supply chain. Any or all of these factors could materially and adversely affect our business, financial condition and results of operations.

We rely on a limited number of suppliers.

Our backlog is subject to customer cancellation or modification and such cancellation could result in decreased sales and increased provisions for excess and obsolete inventory and/or liabilities to our suppliers for products no longer needed.

Customer purchase orders are subject to cancellation or rescheduling by the customer, generally with limited or no penalties. Often, we have incurred expenses prior to such cancellation without adequate monetary compensation. During the year ended December 31, 2009, we experienced net backlog adjustments of approximately $4.5 million, consisting of $3.8 million for order cancellations, and $0.7 million of adjustments related to foreign currency translation. With our current high backlog, a downturn in one or more of our served markets could result in a significant increase in cancellations and/or reschedulings.

We record a provision for excess and obsolete inventory based on historical and future usage trends and other factors including the consideration of the amount of backlog we have on hand at any particular point in time. If our backlog is canceled or modified, our estimates of future product demand may prove to be inaccurate, in which case we may have understated the provision required for excess and obsolete inventory. In the future, if we determine that our inventory is overvalued, we will be required to recognize such costs in our financial statements at the time of such determination. In addition, we place orders with our suppliers based on our customers' orders to us. If our customers cancel their orders with us, we may not be able to cancel our orders with our suppliers and may be

required to take a charge for these cancelled commitments to our suppliers. Any such charges could be material to our results of operations and financial condition.

Our sales to HB LED and data storage manufacturers are highly dependent on these manufacturers' sales for consumer electronics applications, which can experience significant volatility due to seasonal and other factors, which could materially adversely impact our future results of operations.

The demand for HB LEDs and hard disk drives is highly dependent on sales of consumer electronics, such as flat-panel televisions and computer monitors, computers, digital video recorders, camcorders, MP3\4 players and cell phones. Our sales to HB LED manufacturers are also highly dependent on end market adoption of LED technology into general illumination applications. Manufactures of HB LEDs and hard disk drives are among our largest customers and have accounted for a substantial portion of our revenues for the past several years. Factors that could influence the levels of spending on consumer electronic products include consumer confidence, access to credit, volatility in fuel and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs and other macroeconomic factors affecting consumer spending behavior. These and other economic factors could have a material adverse effect on the demand for our customers' products and, in turn, on our customers' demand for our products and services and on our financial condition and results of operations. Furthermore, if manufacturers of HB LEDs have overestimated their potential market share growth, we may experience cancellations of orders in backlog, postponement of customer deliveries, obsolete inventory and/or liabilities to our suppliers for products no longer needed.

In addition, the demand for some of our customers' products can be even more volatile and unpredictable due to the possibility of competing technologies, such as flash memory as an alternative to hard disk drives. Should flash memory become cost competitive it may result in a rapid shift in demand from the hard disk drives made by our customers to alternative storage technologies. Unpredictable fluctuations in demand for our customers' products or rapid shifts in demand from our customers' products to alternative technologies could materially adversely impact our future results of operations.

Negative worldwide economic conditions could result in a decrease in our net sales and an increase in our operating costs, which could adversely affect our business and operating results.

Revenue in our Data Storage and Metrology segments decreased 48% and 24%, respectively, from 2008 to 2009, and revenue in our LED & Solar Process Equipment segment decreased 30% from the first half of the 2008 compared to the first half of 2009, due in part to the recent worldwide economic downturn. If the downturn continues or worsens, many of our customers may delay or further reduce their purchases of our products and services. If negative conditions in the global credit markets prevent our customers' access to credit, product orders in these channels may decrease which could result in lower revenue. Likewise, if our suppliers face challenges in obtaining credit, in selling their products or otherwise in operating their businesses, they may become unable to continue to offer the materials we use to manufacture our products. Our results of operations would be further adversely affected if we were to experience lower than anticipated order levels, cancellations of orders in backlog, postponement of customer deliveries, or pricing pressure as a result of this prolonged slowdown.

In addition, current negative worldwide economic conditions and market instability make it increasingly difficult for us, our customers and our suppliers to accurately forecast future product demand, which could result in obsolete inventory and/or liabilities to our suppliers for products no longer needed.

Furthermore, we finance a portion of our sales through trade credit. In addition to ongoing credit evaluations of our customers' financial condition, we seek to mitigate our credit risk by obtaining

deposits and/or letters of credit on certain of our sales arrangements. We could suffer significant losses if a customer whose accounts receivable we have not secured fails or is otherwise unable to pay us. A significant loss in collections on our accounts receivable would have a negative impact on our financial results.

We are exposed to the risks of operating a global business, including the need to obtain export licenses for certain of our shipments.

Approximately 77% of our 2009 net sales and 63% of our 2008 net sales were generated from sales outside of the United States. We expect sales from non-U.S. markets to continue to represent a significant, and possibly increasing, portion of our sales in the future. Our non-U.S. sales and operations are subject to risks inherent in conducting business abroad, many of which are outside our control, including:

•: difficulties in managing a global enterprise, including staffing, managing distributors and representatives, and repatriation of earnings,
•: regional economic downturns, varying foreign government support, and unstable political environments,
•: longer sales cycles and difficulty in collecting accounts receivable,
•: multiple, conflicting, and changing governmental laws and regulations, including import/export controls and other trade barriers, and
•: different customs and ways of doing business.

Many of these challenges are present in China, a large potential market for our products and an area that we anticipate will present a significant opportunity for growth. These conditions in China and other foreign economies may continue and recur again in the future, which could have a material adverse effect on our business. In addition, political instability, terrorism, acts of war or epidemics in regions where we operate may adversely affect our business and results of operations.

Furthermore, products which are either manufactured in the United States or based on U.S. technology are subject to the United States Export Administration Regulations ("EAR") when exported to and re-exported from international jurisdictions, in addition to the local jurisdiction's export regulations applicable to individual shipments. Currently, our MOCVD deposition systems and certain of our other products are controlled for export under the EAR. Licenses or proper license exceptions may be required for the shipment of our products to certain countries. For example, shipment of our MOCVD systems to China and certain other countries generally requires a U.S. export license. Obtaining an export license requires cooperation from the customer and can add time to the order fulfillment process. While we have generally been very successful in obtaining export licenses in a timely manner, there can be no assurance that this will continue or that an export license can be obtained in each instance where it is required. If an export license is required but cannot be obtained, then we will not be permitted to export the product to the customer. The administrative processing, potential delay and risk of ultimately not obtaining an export license pose a particular disadvantage to us relative to our non-U.S. competitors who are not required to comply with U.S. export controls. Non-compliance with the EAR or other applicable export regulations could result in a wide range of penalties including the denial of export privileges, fines, criminal penalties, and the seizure of commodities. In the event that any export regulatory body determines that any of our shipments violate applicable export regulations, we could be fined significant sums and/or our export capabilities could be restricted, which could have a material adverse impact on our business.

We are exposed to risks associated with our entrance into the emerging solar industry.

An increasing strategic focus for Veeco is to supply equipment to the solar industry. In addition to the other risk factors described herein, the solar industry is characterized by other specific risks, including:

•: changes in demand for solar photovoltaic ("PV") products arising from, among other things, the cost and performance of solar PV technology compared to other energy sources, such as oil, coal, wind, hydroelectric and nuclear;
•: the adequacy of or changes in government energy policies, including the availability and amount of government subsidies or incentives for solar power;
•: whether thin film solar technologies, in particular Copper Indium Gallium Selenide ("CIGS") technology, will be broadly adopted as a viable solar technology; and
•: customers' and end-users' access to affordable financial capital.

If we do not successfully manage the risks resulting from these and other changes occurring in the solar industry, its business, financial condition and results of operations could be materially and adversely affected.

In addition, solar is a relatively new market for us and poses the following additional challenges:

•: the need to attract, motivate and retain employees with skills and expertise in this new area;
•: new and more diverse customers and suppliers, including some with limited operating histories, uncertain and/or limited funding and/or evolving business models;
•: different customer service requirements;
•: new and/or different competitors with potentially more financial or other resources and industry experience; and
•: third parties' intellectual property rights and our ability to secure necessary intellectual property rights with respect to our emerging technologies.

If we do not successfully manage the risks resulting from its entry into the solar market, our business, financial condition and results of operations could be materially and adversely affected.

The timing of our orders, shipments, and revenue recognition may cause our quarterly operating results to fluctuate significantly.

We derive a substantial portion of our net sales in any fiscal period from the sale of a relatively small number of high-priced systems. As a result, the timing of recognition of revenue for a single transaction could have a material effect on our sales and operating results for a particular fiscal period. As is typical in our industry, orders, shipments, and customer acceptances often occur during the last few weeks of a quarter. As a result, delay of only a week or two can often shift the related booking or net sales into the next quarter, which could adversely affect our reported results for the prior quarter. Our quarterly results have fluctuated significantly in the past, and we expect this trend to continue. If our orders, shipments, net sales or operating results in a particular quarter do not meet expectations, our stock price may be adversely affected.

We operate in industries characterized by rapid technological change.

The HB LED, solar, data storage, semiconductor, and scientific research and industrial industries are subject to rapid technological change. Our ability to remain competitive depends on our ability to enhance existing products and develop and manufacture new products in a timely and cost effective

manner and to accurately predict technology transitions. Because new product development commitments must be made well in advance of sales, we must anticipate the future demand for products in selecting which development programs to fund and pursue. Our financial results for 2010 and in the future will depend to a great extent on the successful introduction of several new products, many of which require achieving increasingly stringent technical specifications. We cannot be certain that we will be successful in selecting, developing, manufacturing, and marketing new products or new technologies or in enhancing existing products.

We face significant competition.

We face significant competition throughout the world in each of our reportable segments, which may increase as certain markets in which we operate continue to expand. Many of our competitors have greater financial, engineering, manufacturing, and marketing resources than us. In addition, we face competition from smaller emerging equipment companies whose strategy is to provide a portion of the products and services we offer, using innovative technology to sell products into specialized markets. New product introductions or enhancements by our competitors could cause a decline in sales or loss of market acceptance of our existing products. Increased competitive pressure could also lead to intensified price competition resulting in lower margins. Our failure to compete successfully with these other companies would seriously harm our business.

We depend on a limited number of customers that operate in highly concentrated industries.

Our customer base is and has been highly concentrated. Orders from a relatively limited number of customers have accounted for, and likely will continue to account for, a substantial portion of our net sales, which may lead customers to demand pricing and other terms less favorable to us. Based on net sales, our five largest customers accounted for 39%, 33%, and 34% of our total net sales in 2009, 2008, and 2007, respectively.

If a principal customer discontinues its relationship with us or suffers economic setbacks, our business, financial condition, and operating results could be materially and adversely affected. Our ability to increase sales in the future will depend in part upon our ability to obtain orders from new customers. We cannot be certain that we will be able to do so. In addition, because a relatively small number of large manufacturers, many of whom are our customers, dominate the industries in which they operate, it may be especially difficult for us to replace these customers if we lose their business. A substantial portion of orders in our backlog are orders from our principal customers.

In addition, a substantial investment is required by customers to install and integrate capital equipment into a production line. As a result, once a manufacturer has selected a particular vendor's capital equipment, we believe that the manufacturer generally relies upon that equipment for the specific production line application and frequently will attempt to consolidate its other capital equipment requirements with the same vendor. Accordingly, if a customer selects a competitor's product over ours for technical superiority or other reasons, we could experience difficulty selling to that customer for a significant period of time.

Furthermore, we do not have long-term contracts with our customers. As a result, our agreements with our customers do not provide any assurance of future sales and we are exposed to competitive price pressure on each new order we attempt to obtain. Our failure to obtain new sales orders from new or existing customers would have a negative impact on our results of operations.

The cyclicality of the industries we serve directly affects our business.

Our business depends in large part upon the capital expenditures of manufacturers in the HB LED, solar, data storage, and semiconductor markets, as well as customers in the scientific research and industrial market. We are subject to the business cycles of these industries, the timing, length, and volatility of which are difficult to predict. These industries have historically been highly cyclical, have experienced significant economic downturns in the last decade and have suffered significant adverse consequences in the current economic downturn. As a capital equipment provider, our revenues depend in large part on the spending patterns of these customers, who often delay expenditures or cancel or reschedule orders in reaction to variations in their businesses or general economic conditions. In downturns, we must be able to quickly and effectively align our costs with prevailing market conditions, as well as motivate and retain key employees. However, because a proportion of our costs are fixed, our ability to reduce expenses quickly in response to revenue shortfalls may be limited. A downturn in one or more of these industries could have a material adverse effect on our business, financial condition, and operating results. During periods of rapid growth, we must be able to acquire and/or develop sufficient manufacturing capacity to meet customer demand, and attract, hire, assimilate, and retain a sufficient number of qualified people. We cannot give assurances that our net sales and operating results will not be adversely affected if our customers experience economic downturns or slowdowns in their businesses.

Our sales cycle is long and unpredictable.

Historically, we have experienced long and unpredictable sales cycles (the period between our initial contact with a potential customer and the time when we recognize revenue from that customer). Our sales cycle can range up to twelve months. The timing of an order often depends on the capital expenditure budget cycle of our customers, which is completely out of our control. In addition, the time it takes us to build a product to customer specifications (the "build cycle") typically ranges from one to six months, followed in certain cases by a period of customer acceptance during which the customer evaluates the performance of the system and may potentially reject the system. With the uncertainty and limited visibility related to the recent economic downturn, many customers are reluctant to place orders for delivery in the future. Moreover, as a result of the build cycle and evaluation periods, the period between a customer's initial purchase decision and revenue recognition on an order often varies widely, and variations in length of this period can cause further fluctuations in our operating results. As a result of our lengthy sales cycle, we may incur significant research and development expenses and selling and general and administrative expenses before we generate the related revenues for these products. We may never generate the anticipated revenues if a customer cancels or changes plans. Variations in the length of our sales cycle could also cause our net sales and, therefore, our cash flow and net income to fluctuate widely from period to period.

Our inability to attract, retain, and motivate key employees could have a material adverse effect on our business.

Our success depends upon our ability to attract, retain, and motivate key employees, including those in executive, managerial, engineering and marketing positions, as well as highly skilled and qualified technical personnel and personnel to implement and monitor our financial and managerial controls and reporting systems. Attracting, retaining, and motivating such qualified personnel may be difficult due to challenging industry conditions, competition for such personnel by other technology companies, consolidations and relocations of operations and workforce reductions. Our inability to attract, retain, and motivate key personnel could have a material adverse effect on our business, financial condition or operating results.

The price of our common shares may be volatile and could decline significantly.

The stock market in general and the market for technology stocks in particular, has experienced volatility that has often been unrelated to the operating performance of companies. If these market or industry-based fluctuations continue, the trading price of our common shares could decline significantly independent of our actual operating performance, and shareholders could lose all or a substantial part of their investment. As an example of our volatility, during 2009 our stock traded from a low of $3.22 to a high of $34.84 per share. The market price of our common shares could fluctuate significantly in response to several factors, including among others:

•: general stock market conditions and uncertainty, such as those occasioned by the global liquidity crisis, negative financial news, and the failure of several large financial institutions;
•: receipt of substantial orders or cancellations for our products;
•: actual or anticipated variations in our results of operations;
•: announcements of financial developments or technological innovations;
•: our failure to meet the performance estimates of investment research analysts;
•: changes in recommendations and/or financial estimates by investment research analysts;
•: strategic transactions, such as acquisitions, divestitures or spin-offs; and
•: the occurrence of major catastrophic events.

Significant price and value fluctuations have occurred with respect to the publicly traded securities of the Company and technology companies generally. The price of our common shares is likely to be volatile in the future. In the past, securities class action litigation often has been brought against a company following periods of volatility in the market price of its securities. If similar litigation were pursued against us, it could result in substantial costs and a diversion of management's attention and resources, which could materially adversely affect our results of operations, financial condition and liquidity.

We are subject to foreign currency exchange risks.

We are exposed to foreign currency exchange rate risks that are inherent in our anticipated sales, sales commitments and assets and liabilities that are denominated in currencies other than the United States dollar. Although we attempt to mitigate our exposure to fluctuations in currency exchange rates, these hedging activities may not always be available or adequate to eliminate, or even mitigate, the impact of our exchange rate exposure. Failure to sufficiently hedge or otherwise manage foreign currency risks properly could materially and adversely affect our revenues and gross margins.

The enforcement and protection of our intellectual property rights may be expensive and could divert our valuable resources.

Our success depends in part upon the protection of our intellectual property rights. We rely primarily on patent, copyright, trademark and trade secret laws, as well as nondisclosure and confidentiality agreements and other methods, to protect our proprietary information, technologies and processes. We own various United States and international patents and have additional pending patent applications relating to certain of our products and technologies. The process of seeking patent protection is lengthy and expensive, and we cannot be certain that pending or future applications will actually result in issued patents or that issued patents will be of sufficient scope or strength to provide meaningful protection or commercial advantage. In addition, our intellectual property rights may be circumvented, invalidated or rendered obsolete by the rapid pace of technological change. Policing unauthorized use of our products and technologies is difficult and time consuming. Furthermore, the

laws of other countries may less effectively protect our proprietary rights than U.S. laws. Our outsourcing strategy requires that we share certain portions of our technology with our outsourcing partners, which poses additional risks of infringement and trade secret misappropriation. Infringement of our rights by a third party could result in uncompensated lost market and revenue opportunities. We cannot be certain that the steps we have taken will prevent the misappropriation or unauthorized use of our proprietary information and technologies, particularly in foreign countries where the laws may not protect our proprietary intellectual property rights as fully or as readily as United States laws. Further, we cannot be certain that the laws and policies of any country, including the United States, with respect to intellectual property enforcement or licensing will not be changed in a way detrimental to the sale or use of our products or technology.

We may need to litigate to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights of others. As a result of any such litigation, we could lose our ability to enforce one or more patents or incur substantial unexpected operating costs. Any action we take to enforce our intellectual property rights could be costly and could absorb significant management time and attention, which, in turn, could negatively impact our operating results. In addition, failure to protect our trademark rights could impair our brand identity.

We may be subject to claims of intellectual property infringement by others.

From time to time we have received communications from other parties asserting the existence of patent or other rights which they believe cover certain of our products. We also periodically receive notice from customers who believe that we are required to indemnify them for damages they may incur related to infringement claims made against these customers by third parties. Our customary practice is to evaluate such assertions and to consider the available alternatives, including whether to seek a license, if appropriate. However, we cannot ensure that licenses can be obtained or, if obtained, will be on acceptable terms or that costly litigation or other administrative proceedings will not occur. If we are not able to resolve a claim, negotiate a settlement of the matter, obtain necessary licenses on commercially reasonable terms, and/or successfully prosecute or defend our position, our business, financial condition, and results of operations could be materially and adversely affected.

Our acquisition strategy subjects us to risks associated with evaluating and pursuing these opportunities and integrating these businesses.

We have considered numerous acquisition opportunities and completed several significant acquisitions in the past. We may consider acquisitions of, or investments in, other businesses in the future. Acquisitions involve numerous risks, many of which are unpredictable and beyond our control, including:

•: difficulties and increased costs in integrating the personnel, operations, technologies and products of acquired companies;
•: diversion of management's attention while evaluating, pursuing, and integrating the business to be acquired;
•: potential loss of key employees of acquired companies, especially if a relocation or change in responsibilities is involved;
•: difficulties in managing geographically dispersed operations in a cost-effective manner;
•: lack of synergy or inability to realize expected synergies;

•: increased amortization expense relating to intangible assets; and
•: the potential impairment and write-down of amounts capitalized as intangible assets and goodwill as part of the acquisition, as a result of technological advancements or worse-than-expected performance by the acquired company.

Our inability to effectively manage these risks could materially and adversely affect our business, financial condition, and operating results.

In addition, if we issue equity securities to pay for an acquisition, the ownership percentage of our then-existing shareholders would be reduced and the value of the shares held by these shareholders could be diluted, which could adversely affect the price of our stock and convertible subordinated notes. If we use cash to pay for an acquisition, the payment could significantly reduce the cash that would be available to fund our operations or other purposes, including making payments on the convertible subordinated notes. There can be no assurance that financing for future acquisitions will be available on favorable terms or at all.

We may be required to take additional impairment charges for goodwill and indefinite-lived intangible assets or definite-lived intangible and long-lived assets.

We are required to assess goodwill and indefinite-lived intangible assets annually for impairment, or on an interim basis whenever events occur or circumstances change, such as an adverse change in business climate or a decline in the overall industry, that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We are also required to test our definite-lived intangible and long-lived assets, including acquired intangible assets and property, plant and equipment, for recoverability and impairment whenever there are indicators of impairment, such as an adverse change in business climate.

In 2008 we recorded an asset impairment charge of $73.0 million consisting of $52.3 million related to goodwill, $5.0 million of indefinite-lived intangible assets, $14.6 million related to definite-lived intangible assets and $1.1 million in property, plant and equipment. At December 31, 2009, we had $59.4 million of goodwill and $89.5 million of intangible and long-lived assets. As part of our long-term strategy, we may pursue future acquisitions of other companies or assets which could potentially increase our goodwill and intangible and long-lived assets. Adverse changes in business conditions could materially impact our estimates of future operations and result in additional impairment charges to these assets. If our goodwill or intangible and long-lived assets were to become further impaired, our results of operations could be materially and adversely affected.

Changes in accounting pronouncements or taxation rules or practices may adversely affect our financial results.

Changes in accounting pronouncements or taxation rules or practices can have a significant effect on our reported results. For example, under new guidance for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), we recorded additional non-cash interest expense in each reporting period during which our subordinated convertible notes were outstanding. The adoption of this new guidance did have a material effect on our consolidated financial position, results of operations, and earnings per share. This additional interest expense will not require the use of cash. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Application of Critical Accounting Policies" below. Other new accounting pronouncements or taxation rules and varying interpretations of accounting pronouncements or taxation practices have occurred and may occur in the future. New rules, changes to existing rules, if any, or the questioning of current practices may adversely affect our reported financial results or change the way we conduct our business.

We are subject to internal control evaluations and attestation requirements of Section 404 of the Sarbanes-Oxley Act.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we must include in our Annual Report on Form 10-K a report of management on the effectiveness of our internal control over financial reporting. Ongoing compliance with this requirement is complex, costly and time-consuming. Although our assessment, testing, and evaluation resulted in our conclusion that, as of December 31, 2009, our internal controls over financial reporting were effective, we cannot predict the outcome of our testing in future periods. If our internal controls are ineffective in future periods, or if our management does not timely assess the adequacy of such internal controls, we could be subject to regulatory sanctions, the public's perception of our Company may decline, and our financial results or the market price of our shares could be adversely affected.

We are subject to risks of non-compliance with environmental, health and safety regulations.

We are subject to environmental, health and safety regulations in connection with our business operations, including but not limited to regulations related to the development, manufacture, and use of our products. Failure or inability to comply with existing or future environmental and safety regulations could result in significant remediation liabilities, the imposition of fines and/or the suspension or termination of development, manufacture, or use of certain of our products, each of which could have a material adverse effect on our business, financial condition, and results of operations.

We have significant operations in California and other locations which could be materially and adversely impacted in the event of a natural disaster or other significant disruption.

Our Metrology segment designs and manufactures our atomic force microscopes and other products in Camarillo and Santa Barbara, California. Our operations in these and other locations, as well as those of our customers in the U.S., the Asia-Pacific region and other areas, could be subject to natural disasters or other significant disruptions, including earthquakes, fires, hurricanes, floods, water shortages, other extreme weather conditions, medical epidemics, acts of terrorism, power shortages and blackouts, telecommunications failures, and other natural and manmade disasters or disruptions. In the event of such a natural disaster or other disruption, we could experience disruptions or interruptions to our operations or the operations of our suppliers, distributors, resellers or customers; destruction of facilities; and/or loss of life, all of which could materially increase our costs and expenses and materially adversely affect our business, revenue and financial condition.

We have adopted certain measures that may have anti-takeover effects which may make an acquisition of our Company by another company more difficult.

We have adopted, and may in the future adopt, certain measures that may have the effect of delaying, deferring or preventing a takeover or other change in control of our Company that a holder of our common stock might not consider in its best interest. These measures include:

•: "blank check" preferred stock;
•: classified board of directors;
•: shareholder rights plan or "poison pill" and
•: certain certificate of incorporation and bylaws provisions.

Our board of directors has the authority to issue up to 500,000 shares of preferred stock and to fix the rights (including voting rights), preferences and privileges of these shares ("blank check" preferred). Such preferred stock may have rights, including economic rights, senior to our common

stock. As a result, the issuance of the preferred stock could have a material adverse effect on the price of our common stock and could make it more difficult for a third party to acquire a majority of our outstanding common stock.

Our board of directors is divided into three classes with each class serving a staggered three-year term. The existence of a classified board will make it more difficult for our shareholders to change the composition (and therefore the policies) of our board of directors in a relatively short period of time.

We have adopted a shareholder rights plan, under which we have granted to our shareholders rights to purchase shares of junior participating preferred stock. This plan or "poison pill" could discourage a takeover that is not approved by our board of directors but which a shareholder might consider in its best interest, thereby adversely affecting our stock price.

We have adopted certain certificate of incorporation and bylaws provisions which may have anti-takeover effects. These include: (a) requiring certain actions to be taken at a meeting of shareholders rather than by written consent, (b) requiring a super-majority of shareholders to approve certain amendments to our bylaws, (c) limiting the maximum number of directors, and (d) providing that directors may be removed only for "cause." These measures and those described above may have the effect of delaying, deferring or preventing a takeover or other change in control of Veeco that a holder of our common stock might consider in its best interest.

In addition, we are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a Delaware corporation from engaging in any business combination, including mergers and asset sales, with an interested stockholder (generally, a 15% or greater stockholder) for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The operation of Section 203 may have anti-takeover effects, which could delay, defer or prevent a takeover attempt that a holder of our common stock might consider in its best interest.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters and our principal product development and marketing, manufacturing, research and development, and sales and service facilities, as well as the approximate size and the segments which utilize such facilities, are:

Owned Facilities Location		Mortgaged	Use

Plainview, NY	80,000	No	Data Storage and LED & Solar Process Equipment and Corporate Headquarters
Santa Barbara, CA	100,000	No	Metrology and Data Storage Process Equipment
Somerset, NJ	80,000	No	LED & Solar Process Equipment
St. Paul, MN(1)	125,000	Yes	LED & Solar Process Equipment
Tucson, AZ(2)	110,000	No	Metrology

Leased Facilities Location		Lease Expires	Use

Camarillo, CA(3)	26,000	2012	Held for sublease
Camarillo, CA	19,000	2010	Metrology
Clifton Park, NY	18,000	2014	LED & Solar Process Equipment
Clifton Park, NY	8,000	2011	LED & Solar Process Equipment
Fort Collins, CO	26,000	2011	Data Storage Process Equipment
Fremont, CA	14,000	2010	Sales and Service
Lowell, MA	28,000	2010	LED & Solar Process Equipment
Woodbury, NY(4)	32,000	2011	Held for sublease

	2009				2008

	High		Low		High		Low
First Quarter	$	7.16	$	3.96	$	17.96	$	12.39
Second Quarter		12.99		6.19		19.71		16.63
Third Quarter		23.49		11.36		18.11		14.42
Fourth Quarter		34.35		21.90		14.81		3.83

	Cumulative Total Return as of December 31,

	2004		2005		2006		2007		2008		2009
Veeco Instruments Inc.		100.0		82.25		88.89		79.26		30.09		156.81
S&P Smallcap 600		100.0		107.68		123.96		123.59		85.19		106.97
PHLX Semiconductor		100.0		115.78		106.63		115.13		64.57		102.97
Peer Group		100.0		95.99		126.92		130.61		57.92		113.95

		Years ended December 31,

		2009(1)			2008(2)			2007(3)			2006(4)		2005(5)
		(In thousands, except per share data)
Statement of Operations Data:
Net sales		$	380,149		$	442,809		$	402,475		$	441,034	$	410,190
Operating (loss) income			(7,435	)		(70,558	)		(12,061	)		22,456		11,066
Net (loss) income attributable to Veeco			(15,567	)		(75,191	)		(19,210	)		14,917		(897	)
Net (loss) income per common share attributable to Veeco:
	Basic	$	(0.48	)	$	(2.40	)	$	(0.62	)	$	0.49	$	(0.03	)
	Diluted	$	(0.48	)	$	(2.40	)	$	(0.62	)	$	0.48	$	(0.03	)
Weighted average shares outstanding:
	Basic		32,628			31,347			31,020			30,492		29,921
	Diluted		32,628			31,347			31,020			31,059		29,921

	Years ended December 31,

	2009		2008		2007		2006		2005
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	148,589	$	103,799	$	117,083	$	147,046	$	124,499
Short-term investments		135,000		—		—		—		—
Working capital		317,317		168,528		174,516		248,060		229,650
Goodwill		59,422		59,160		100,898		100,898		99,622
Total assets		605,372		429,541		529,334		589,600		567,860
Long-term debt (including current installments)		101,176		98,526		132,118		209,204		229,580
Total equity		359,059		225,810		289,158		283,393		248,587

		Year ended December 31,										Dollar and Percentage Change Year to Year

		2009					2008					Dollar and Percentage Change Year to Year
Net sales		$	380,149		100	%	$	442,809		100	%	$	(62,660	)	(14.2	)%
Cost of sales			228,587		60.1			266,215		60.1			(37,628	)	(14.1	)

Gross profit			151,562		39.9			176,594		39.9			(25,032	)	(14.2	)
Operating expenses:
	Selling, general, and administrative expense		85,455		22.5			92,838		21.0			(7,383	)	(8.0	)
	Research and development expense		57,430		15.1			60,353		13.6			(2,923	)	(4.8	)
	Amortization expense		7,338		1.9			10,745		2.4			(3,407	)	(31.7	)
	Restructuring expense		7,680		2.0			10,562		2.4			(2,882	)	(27.3	)
	Asset impairment charge		304		0.1			73,322		16.6			(73,018	)	(99.6	)
	Other expense (income), net		790		0.2			(668	)	(0.2	)		1,458		(218.3	)

Total operating expenses			158,997		41.8			247,152		55.8			(88,155	)	(35.7	)

Operating loss			(7,435	)	(2.0	)		(70,558	)	(15.9	)		63,123		(89.5	)
Interest expense			7,732		2.0			9,317		2.1			(1,585	)	(17.0	)
Interest income			(882	)	(0.2	)		(2,588	)	(0.6	)		1,706		(65.9	)
Gain on extinguishment of debt			—		—			(3,758	)	(0.8	)		3,758		(100.0	)

Loss before income taxes			(14,285	)	(3.8	)		(73,529	)	(16.6	)		59,244		(80.6	)
Income tax provision			1,347		0.4			1,892		0.4			(545	)	(28.8	)

Net loss			(15,632	)	(4.1	)		(75,421	)	(17.0	)		59,789		(79.3	)
Net loss attributable to noncontrolling interest			(65	)	(0.0	)		(230	)	0.0			165		(71.7	)

Net loss attributable to Veeco		$	(15,567	)	(4.1	)%	$	(75,191	)	(17.0	)%	$	59,624		(79.3	)%

		Sales									Orders

		Year ended December 31,				Dollar and Percentage Change					Year ended December 31,				Dollar and Percentage Change					Book to Bill Ratio
		2009		2008		Year to Year					2009		2008		Year to Year					2009		2008
Segment Analysis
	LED & Solar Process Equipment	$	205,153	$	165,812	$	39,341		23.7	%	$	440,784	$	160,162	$	280,622		175.2	%		2.15		0.97
	Data Storage Process Equipment		77,259		149,123		(71,864	)	(48.2	)		97,497		138,653		(41,156	)	(29.7	)		1.26		0.93
	Metrology		97,737		127,874		(30,137	)	(23.6	)		101,261		125,622		(24,361	)	(19.4	)		1.04		0.98

	Total	$	380,149	$	442,809	$	(62,660	)	(14.2	)%	$	639,542	$	424,437	$	215,105		50.7	%		1.68		0.96

Regional Analysis
	Americas	$	90,494	$	165,926	$	(75,432	)	(45.5	)%	$	105,646	$	145,082	$	(39,436	)	(27.2	)%		1.17		0.87
	Europe, Middle East and Africa ("EMEA")		78,042		94,142		(16,100	)	(17.1	)		78,374		86,518		(8,144	)	(9.4	)		1.00		0.92
	Japan		19,640		38,453		(18,813	)	(48.9	)		34,262		31,593		2,669		8.4			1.74		0.82
	Asia Pacific		191,973		144,288		47,685		33.0			421,260		161,244		260,016		161.3			2.19		1.12

	Total	$	380,149	$	442,809	$	(62,660	)	(14.2	)%	$	639,542	$	424,437	$	215,105		50.7	%		1.68		0.96

	Payments due by period

Contractual Cash Obligations and Commitments	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt(1)	$	108,669	$	212	$	106,319	$	290	$	1,848
Interest on debt(1)		11,568		4,592		6,228		341		407
Operating leases(2)		9,367		3,814		3,647		1,430		476
Letters of credit and bank guarantees(3)		12,681		12,681		—		—		—
Purchase commitments(4)		138,921		138,921		—		—		—

	$	281,206	$	160,220	$	116,194	$	2,061	$	2,731

	Fiscal 2009													Fiscal 2008

	Q1			Q2			Q3		Q4		Year			Q1			Q2		Q3			Q4			Year
	(in thousands, except per share data)													(in thousands, except per share data)
Net sales	$	62,849		$	72,020		$	98,913	$	146,367	$	380,149		$	102,307		$	114,449	$	115,709		$	110,344		$	442,809
Gross profit		20,382			24,384			40,908		65,888		151,562			42,626			47,730		46,083			40,155			176,594
Net (loss) income attributable to Veeco		(20,902	)		(14,680	)		1,270		18,745		(15,567	)		(2,296	)		3,471		(2,413	)		(73,953	)		(75,191	)
Net (loss) income per basic common share attributable to Veeco	$	(0.66	)	$	(0.47	)	$	0.04	$	0.53	$	(0.48	)	$	(0.07	)	$	0.11	$	(0.08	)	$	(2.35	)	$	(2.40	)
Net (loss) income per diluted common share attributable to Veeco	$	(0.66	)	$	(0.47	)	$	0.04	$	0.50	$	(0.48	)	$	(0.07	)	$	0.11	$	(0.08	)	$	(2.35	)	$	(2.40	)
Weighted average shares outstanding—Basic		31,515			31,497			31,608		35,623		32,628			31,161			31,255		31,458			31,500			31,347
Weighted average shares outstanding—Diluted		31,515			31,497			32,375		37,742		32,628			31,161			31,590		31,458			31,500			31,347

			Weighted average exercise price of outstanding options, warrants, and rights (b)

Equity compensation plans approved by security holders	4,365,406	(1)	$	16.05	554,950
Equity compensation plans not approved by security holders	140,564	(2)	$	25.54	—

Total	4,505,970				554,950

Number	Exhibit	Incorporated by Reference to the Following Documents

3.1	Amended and Restated Certificate of Incorporation of the Company dated December 1, 1994, as amended June 2, 1997 and July 25, 1997.	Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, Exhibit 3.1
3.2	Amendment to Certificate of Incorporation of Veeco dated May 29, 1998.	Annual Report on Form 10-K for the year ended December 31, 2000, Exhibit 3.2
3.3	Amendment to Certificate of Incorporation of Veeco dated May 5, 2000.	Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, Exhibit 3.1
3.4	Certificate of Designation, Preferences, and Rights of Series A Junior Participating Preferred Stock of Veeco.	Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, Exhibit 3.1
3.5	Fourth Amended and Restated Bylaws of the Company, effective October 23, 2008	Current Report on Form 8-K filed October 27, 2008, Exhibit 3.1
3.6	Amendment to Certificate of Incorporation of Veeco dated May 16, 2002	Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, Exhibit 3.1
4.1	Rights Agreement, dated as of March 13, 2001, between Veeco Instruments Inc. and American Stock Transfer and Trust Company, as Rights Agent, including the form of the Certificate of Designation, Preferences, and Rights setting forth the terms of the Series A Junior Participating Preferred Stock, par value $0.01 per share, as Exhibit A, the form of Rights Certificates as Exhibit B and the Summary of Rights to Purchase Preferred Stock as Exhibit C.	Registration Statement on Form 8-A dated March 15, 2001, Exhibit 1
4.2	Amendment to Rights Agreement, dated as of September 6, 2001, between Veeco Instruments Inc. and American Stock Transfer and Trust Company, as rights agent.	Current Report on Form 8-K, filed September 21, 2001, Exhibit 4.1
4.3	Amendment No 2 to Rights Agreement, dated as of July 11, 2002, between Veeco Instruments Inc. and American Stock Transfer and Trust Company, as rights agent.	Current Report on Form 8-K, filed July 12, 2002, Exhibit 4.1

Number	Exhibit	Incorporated by Reference to the Following Documents

4.4	Indenture, dated April 16, 2007, between Veeco Instruments Inc. and U.S. Bank National Trust	Post-Effective Amendment No. 1 To Registration Statement on Form S-3 (File No. 333-128004) filed April 16, 2007, Exhibit 4.1
4.5	First Supplemental Indenture, dated April 20, 2007, by and between Veeco Instruments Inc. and U.S. Bank Trust National Association, as Trustee	Current Report on Form 8-K, filed April 20, 2007, Exhibit 4.1
10.1	Credit Agreement, dated as of August 20, 2007, by and among Veeco Instruments Inc., HSBC Bank USA, National Association, as administrative agent, and the lenders named therein.	Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, Exhibit 10.1
10.2	First Amendment dated as of February 25, 2008 to the Credit Agreement dated August 20, 2007 among Veeco Instruments Inc., HSBC Bank USA, National Association, as administrative agent, and the lenders named therein.	Annual Report on Form 10-K for the year ended December 31, 2007, Exhibit 10.2
10.3	Amendment and Reaffirmation dated August 20, 2007 of Security Agreement dated as of March 15, 2005 among Veeco Instruments Inc., the subsidiaries of Veeco named therein and HSBC Bank USA, National Association, as administrative agent.	Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, Exhibit 10.2
10.4	Loan Agreement dated as of December 15, 1999 between Applied Epi, Inc. and Jackson National Life Insurance Company.	Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, Exhibit 10.2
10.5	Amendment to Loan Documents effective as of September 17, 2001 between Applied Epi, Inc. and Jackson National Life Insurance Company (executed in June 2002).	Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, Exhibit 10.2
10.6	Promissory Note dated as of December 15, 1999 issued by Applied Epi, Inc. to Jackson National Life Insurance Company.	Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, Exhibit 10.3
10.7*	Veeco Instruments Inc. Amended and Restated 1992 Employees' Stock Option Plan.	Registration Statement on Form S-1 (File No. 33-93958), Exhibit 10.20
10.8*	Amendment dated May 15, 1997 to Veeco Instruments Inc. Amended and Restated 1992 Employees' Stock Option Plan.	Registration Statement on Form S-8 (File No. 333-35009) filed September 5, 1997, Exhibit 10.1
10.9*	Amendment dated July 25, 1997 to Veeco Instruments Inc. Amended and Restated 1992 Employees' Stock Option Plan.	Registration Statement on Form S-8 (File No. 333-35009) filed September 5, 1997, Exhibit 10.2

Number	Exhibit	Incorporated by Reference to the Following Documents

10.10*	Amendment dated May 29, 1998 to Veeco Instruments Inc. Amended and Restated 1992 Employees' Stock Option Plan.	Registration Statement on Form S-8 (File No. 333-79469) filed May 27, 1999, Exhibit 10.1
10.11*	Amendment dated May 14, 1999 to Veeco Instruments Inc. Amended and Restated 1992 Employees' Stock Option Plan.	Registration Statement on Form S-8 (File No. 333-79469) filed May 27, 1999, Exhibit 10.2
10.12*	Veeco Instruments Inc. 1994 Stock Option Plan for Outside Directors.	Registration Statement on Form S-1 (File No. 33-85184), Exhibit 10.17
10.13*	Amendment dated May 15, 1996 to Veeco Instruments Inc. Amended and Restated 1994 Stock Option Plan for Outside Directors.	Registration Statement on Form S-8 (File No. 333-08981) filed July 26, 1996, Exhibit 10.2
10.14*	Amendment dated May 15, 1997 to Veeco Instruments Inc. Amended and Restated 1994 Stock Option Plan for Outside Directors.	Registration Statement on Form S-8 (File No. 333-35009) filed September 5, 1997, Exhibit 10.3
10.15*	Amendment dated May 21, 1999 to Veeco Instruments Inc. Amended and Restated 1994 Stock Option Plan for Outside Directors.	Registration Statement on Form S-8 (File No. 333-79469) filed May 27, 1999, Exhibit 10.3
10.16*	Veeco Instruments Inc. Amended and Restated 2000 Stock Incentive Plan, effective July 20, 2006.	Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, Exhibit 10.4
10.17*	Amendment No. 1 effective April 18, 2007 (ratified by the Board August 7, 2007) to Veeco Instruments Inc. Amended and Restated 2000 Stock Incentive Plan.	Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, Exhibit 10.1
10.18*	Form of Restricted Stock Agreement pursuant to the Veeco Instruments Inc. 2000 Stock Incentive Plan, effective November 2005	Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, Exhibit 10.3
10.19*	Form of Directors Restricted Stock Agreement pursuant to the Veeco Instruments Inc. 2000 Stock Incentive Plan, effective May 2006	Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, Exhibit 10.2
10.20*	Form of Notice of Restricted Stock Award and related terms and conditions pursuant to the Veeco Instruments Inc. 2000 Stock Incentive Plan, effective June 2006	Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, Exhibit 10.3
10.21*	Veeco Instruments Inc. 2000 Stock Option Plan for Non-Officer Employees.	Registration Statement on Form S-8 (File Number 333-49476) filed November 7, 2000, Exhibit 4.4
10.22*	Amendment No. 1 to the Veeco Instruments Inc. 2000 Stock Option Plan for Non-Officer Employees, effective dated July 26, 2001.	Registration Statement on Form S-8 (File Number 333-66574) filed August 2, 2001, Exhibit 4.2

Number	Exhibit	Incorporated by Reference to the Following Documents

10.23*	Veeco Instruments Inc. 2006 Long-Term Cash Incentive Plan	Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, Exhibit 10.1
10.24*	Employment agreement effective as of July 1, 2007 between John R. Peeler and Veeco Instruments Inc.	Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, Exhibit 10.3
10.25*	Employment Agreement dated as of April 1, 2003 between John F. Rein, Jr. and Veeco Instruments Inc.	Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, Exhibit 10.5
10.26*	Amendment to Employment Agreement of John F. Rein, Jr., effective June 9, 2006	Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, Exhibit 10.2
10.27*	Letter Agreement dated January 21, 2004 between the Company and John P. Kiernan.	Annual Report on Form 10-K for the year ended December 31, 2003, Exhibit 10.38
10.28*	Letter Agreement dated October 31, 2005 between Veeco Instruments Inc. and Robert P. Oates	Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, Exhibit 10.1
10.29*	Form of Amendment to Letter Agreements of John P. Kiernan and Robert P. Oates effective June 9, 2006	Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, Exhibit 10.3
10.30*	Letter Agreement dated January 11, 2008 between Veeco Instruments Inc. and Mark R. Munch	Annual Report on Form 10-K for the year ended December 31, 2007, Exhibit 10.33
10.31*	Form of Indemnification Agreement entered into between Veeco Instruments Inc. and each of its directors and executive officers.	Current Report on Form 8-K filed on October 23, 2006, Exhibit 10.1
10.32*	Amendment to Employment Agreement dated as of September 12, 2008 between John F. Rein, Jr. and Veeco Instruments Inc.	Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, Exhibit 10.1
10.33*	Amendment to Employment Agreement dated as of September 12, 2008 between Robert P. Oates and Veeco Instruments Inc.	Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, Exhibit 10.2
10.34*	Senior Executive Change in Control Policy effective as of September 12, 2008	Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, Exhibit 10.3
10.35*	Service Agreement effective July 24, 2008 between Edward H. Braun and Veeco Instruments Inc.	Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, Exhibit 10.1
10.36*	Amendment No. 1 dated December 23, 2008 (effective September 12, 2008) to Veeco Instruments Inc. Senior Executive Change in Control Policy	Annual Report on Form 10-K for the year ended December 31, 2008, Exhibit 10.37
10.37*	Amendment effective December 31, 2008 to Employment Agreement between Veeco Instruments Inc. and John R. Peeler	Annual Report on Form 10-K for the year ended December 31, 2008, Exhibit 10.38

Number	Exhibit	Incorporated by Reference to the Following Documents

10.38*	Amendment effective December 31, 2008 to Employment Agreement between Veeco Instruments Inc. and John F. Rein, Jr.	Annual Report on Form 10-K for the year ended December 31, 2008, Exhibit 10.39
10.39*	Form of Amendment effective December 31, 2008 to Letter Agreements between Veeco Instruments Inc. and each of John P. Kiernan, Mark R. Munch and Robert P. Oates	Annual Report on Form 10-K for the year ended December 31, 2008, Exhibit 10.40
10.40*	Amendment No. 2 dated January 22, 2009 to Veeco Instruments Inc. Amended and Restated 2000 Stock Incentive Plan.	Annual Report on Form 10-K for the year ended December 31, 2008, Exhibit 10.41
10.41*	Second Amendment dated as of February 27, 2009 (effective December 31, 2008) to the Credit Agreement dated August 20, 2007 among Veeco Instruments Inc., HSBC Bank USA, National Association, as administrative agent, and the lenders named herein.	Annual Report on Form 10-K for the year ended December 31, 2008, Exhibit 10.42
10.42	Third Amendment dated as of May 7, 2009 (effective December 31, 2008) to the Credit Agreement dated August 20, 2007 among Veeco Instruments Inc., HSBC Bank USA, National Association, as administrative agent, and the lenders named herein.	Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, Exhibit 10.3
10.43	Letter agreement effective as of June 19, 2009 between John P. Kiernan and Veeco Instruments Inc.	Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, Exhibit 10.2
10.44*	Veeco Instruments Inc. 2009 Management Bonus Plan dated February 27, 2009	Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, Exhibit 10.1
10.45*	Veeco Instruments Inc. 2009 Supplemental Management Profit Sharing Plan dated August 20, 2009	Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, Exhibit 10.2
21.1	Subsidiaries of the Registrant.	Filed herewith
23.1	Consent of Ernst & Young LLP.	Filed herewith
31.1	Certification of Chief Executive Officer pursuant to Rule 13a—14(a) or Rule 15d—14(a) of the Securities and Exchange Act of 1934.	Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Rule 13a—14(a) or Rule 15d—14(a) of the Securities and Exchange Act of 1934.	Filed herewith


		VEECO INSTRUMENTS INC.
		By:		/s/ JOHN R. PEELER John R. Peeler Chief Executive Officer

Signature		Title


/s/ EDWARD H. BRAUN Edward H. Braun		Director and Chairman
/s/ RICHARD A. D'AMORE Richard A. D'Amore		Director
/s/ JOEL A. ELFTMANN Joel A. Elftmann		Director
/s/ HEINZ K. FRIDRICH Heinz K. Fridrich		Director
/s/ ROGER D. MCDANIEL Roger D. McDaniel		Director
/s/ JOHN R. PEELER John R. Peeler		Director and Chief Executive Officer (principal executive officer)
/s/ IRWIN H. PFISTER Irwin H. Pfister		Director
/s/ PETER J. SIMONE Peter J. Simone		Director
/s/ DAVID D. GLASS David D. Glass		Executive Vice President and Chief Financial Officer (principal financial officer)
/s/ JOHN P. KIERNAN John P. Kiernan		Senior Vice President, Finance and Corporate Controller (principal accounting officer)


		/s/ ERNST & YOUNG LLP


		/s/ ERNST & YOUNG LLP

Number	Exhibit	Incorporated by Reference to the Following Documents

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002	Filed herewith
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002	Filed herewith

		Page

Management's Report on Internal Control Over Financial Reporting		F-2
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting		F-3
Report of Independent Registered Public Accounting Firm on Financial Statements		F-4
Consolidated Balance Sheets at December 31, 2009 and 2008		F-5
Consolidated Statements of Operations for the years ended December 31, 2009, 2008, and 2007		F-6
Consolidated Statements of Equity for the years ended December 31, 2009, 2008, and 2007		F-7
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2009, 2008, and 2007		F-8
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008, and 2007		F-9
Notes to Consolidated Financial Statements		F-10
Schedule II—Valuation and Qualifying Accounts		S-1


/s/ JOHN R. PEELER John R. Peeler Chief Executive Officer Veeco Instruments Inc. February 24, 2010
/s/ DAVID D. GLASS David D. Glass Executive Vice President and Chief Financial Officer Veeco Instruments Inc. February 24, 2010

		December 31,

		2009			2008
Assets
Current assets:
	Cash and cash equivalents	$	148,589		$	103,799
	Short-term investments		135,000			—
	Accounts receivable, less allowance for doubtful accounts of $857 in 2009 and $937 in 2008		84,358			59,659
	Inventories		77,564			94,930
	Prepaid expenses and other current assets		7,819			6,425
	Deferred income taxes		3,105			2,185

Total current assets			456,435			266,998
Property, plant, and equipment at cost, net			59,389			64,372
Goodwill			59,422			59,160
Intangible assets, net			29,697			38,818
Other assets			429			193

Total assets		$	605,372		$	429,541

Liabilities and equity
Current liabilities:
	Accounts payable	$	29,112		$	29,610
	Accrued expenses		106,445			66,964
	Deferred profit		2,520			1,346
	Income taxes payable		829			354
	Current portion of long-term debt		212			196

Total current liabilities			139,118			98,470
Deferred income taxes			5,039			4,540
Long-term debt			100,964			98,330
Other non-current liabilities			1,192			2,391
Commitments and contingencies (Note 9)
Equity:
Preferred stock, 500,000 shares authorized; no shares issued and outstanding			—			—
Common stock; $.01 par value; authorized 60,000,000 shares; 39,003,114 and 32,187,599 shares issued and outstanding in 2009 and 2008, respectively			382			316
Additional paid-in-capital			575,860			426,300
Accumulated deficit			(224,324	)		(208,757	)
Accumulated other comprehensive income			7,141			7,167

Equity attributable to Veeco			359,059			225,026
Noncontrolling interest			—			784

Total equity			359,059			225,810

Total liabilities and equity		$	605,372		$	429,541

														Equity Attributable to

	Common Stock										Accumulated Other Comprehensive Income			Equity Attributable to
	Common Stock				Additional Paid-in Capital			Accumulated Deficit									Noncontrolling Interest
	Shares		Amount		Additional Paid-in Capital			Accumulated Deficit						Veeco			Noncontrolling Interest			Total
Balance at January 1, 2007		31,118,622	$	309	$	391,376		$	(113,528	)	$	3,594		$	281,751		$	1,642		$	283,393
Cumulative effect of accounting change due to adoption of FIN 48		—		—		—			(828	)		—			(828	)		—			(828	)
Exercise of stock options and stock issuances under stock purchase plan		205,995		2		3,169			—			—			3,171			—			3,171
Share-based compensation expense		—		—		5,621			—			—			5,621			—			5,621
Issuance, vesting and cancellation of restricted stock		499,273		1		(371	)		—			—			(370	)		—			(370	)
Issuance of convertible notes		—		—		16,318			—			—			16,318			—			16,318
Translation adjustments		—		—		—			—			1,698			1,698			—			1,698
Defined benefit pension plan		—		—		—			—			(7	)		(7	)		—			(7	)
Net loss		—		—		—			(19,210	)		—			(19,210	)		(628	)		(19,838	)

Balance at December 31, 2007		31,823,890		312		416,113			(133,566	)		5,285			288,144			1,014			289,158
Exercise of stock options		67,080		1		680			—			—			681			—			681
Share-based compensation expense		—		—		10,526			—			—			10,526			—			10,526
Issuance, vesting and cancellation of restricted stock		296,629		3		(1,019	)		—			—			(1,016	)		—			(1,016	)
Translation adjustments		—		—		—			—			1,845			1,845			—			1,845
Defined benefit pension plan		—		—		—			—			37			37			—			37
Net loss		—		—		—			(75,191	)		—			(75,191	)		(230	)		(75,421	)

Balance at December 31, 2008		32,187,599		316		426,300			(208,757	)		7,167			225,026			784			225,810
Exercise of stock options		755,229		8		12,578			—			—			12,586			—			12,586
Share-based compensation expense		—		—		8,537			—			—			8,537			—			8,537
Issuance, vesting and cancellation of restricted stock		310,286		—		(607	)		—			—			(607	)		—			(607	)
Issuance of common stock		5,750,000		58		130,028			—			—			130,086			—			130,086
Translation adjustments		—		—		—			—			(58	)		(58	)		—			(58	)
Defined benefit pension plan		—		—		—			—			32			32			—			32
Purchase of remaining 80.1% of noncontrolling interest		—		—		(976	)		—			—			(976	)		(719	)		(1,695	)
Net loss		—		—		—			(15,567	)		—			(15,567	)		(65	)		(15,632	)

Balance at December 31, 2009		39,003,114	$	382	$	575,860		$	(224,324	)	$	7,141		$	359,059		$	—		$	359,059

	December 31,

	2009		2008
Raw materials	$	49,013	$	57,815
Work in process		21,560		28,733
Finished goods		6,991		8,382

	$	77,564	$	94,930

	December 31,

	December 31,				Estimated Useful Lives
	2009		2008		Estimated Useful Lives
Land	$	9,274	$	9,274
Buildings and improvements		44,383		43,743	10-40 years
Machinery and equipment		100,156		105,194	3-10 years
Leasehold improvements		5,088		5,163	3-7 years

Gross property, plant, and equipment at cost		158,901		163,374
Less accumulated depreciation and amortization		99,512		99,002

Net property, plant, and equipment at cost	$	59,389	$	64,372

	2009		2008

Balance as of January 1	$	59,160	$	100,898
Impairment		—		(52,312	)
DayStar acquisition		262		—
Mill Lane acquisition		—		930
Mill Lane earnout		—		9,644

Balance as of December 31	$	59,422	$	59,160

	December 31, 2009									December 31, 2008

	Purchased technology			Other intangible assets			Total intangible assets			Purchased technology			Other intangible assets			Total intangible assets
Gross intangible assets	$	111,373		$	48,190		$	159,563		$	111,033		$	49,113		$	160,146
Less accumulated amortization		(95,533	)		(34,333	)		(129,866	)		(92,094	)		(29,234	)		(121,328	)

Intangible assets, net	$	15,840		$	13,857		$	29,697		$	18,939		$	19,879		$	38,818

	December 31,

	2009		2008
Payroll and related benefits	$	22,848	$	20,059
Sales, use, income and other taxes		3,464		2,776
Customer deposits and advanced billings		61,976		18,021
Warranty		7,556		6,892
Restructuring liability		2,451		3,568
Contingent earn-out payment		—		9,644
Other		8,150		6,004

	$	106,445	$	66,964

	2009			2008

Balance as of beginning of year	$	6,892		$	6,502
Warranties issued during the period		5,156			4,783
Settlements made during the period		(4,492	)		(4,393	)

Balance as of end of year	$	7,556		$	6,892

	December 31,

	2009		2008
Convertible subordinated debt (New Notes)	$	98,081	$	95,235
Mortgage notes payable		3,095		3,291

		101,176		98,526
Less current portion		212		196

	$	100,964	$	98,330

	December 31,

	2009		2008
Carrying amount of the equity component	$	16,318	$	16,318

Principal balance of the liability component	$	105,574	$	105,574
Less: unamortized discount		7,493		10,339

Net carrying value of the liability component	$	98,081	$	95,235

			Weighted- Average Grant-Date Fair Value

Nonvested at December 31, 2008	679		$	17.84
Granted	512			9.60
Vested	(178	)		19.61
Forfeited (including cancelled awards)	(121	)		16.25

Nonvested at December 31, 2009	892		$	12.97

			Weighted- Average Exercise Price		Aggregate Intrinsic Value (000s)

Outstanding at December 31, 2008	5,521		$	20.23
Granted	1,633			11.02
Exercised	(755	)		16.66
Forfeited (including cancelled options)	(1,893	)		22.94

Outstanding at December 31, 2009	4,506		$	16.35	$	75,763	4.5

Options exercisable at December 31, 2009	2,126		$	19.84	$	28,618	2.7

	Options Outstanding						Options Exercisable

Range of Exercise Prices	Number Outstanding at December 31, 2009 (000s)		Weighted- Average Remaining Contractual Life (in years)		Weighted- Average Exercise Price		Number Exercisable at December 31, 2009 (000s)		Weighted- Average Exercise Price
$0.27-6.51		55		2.8	$	2.54		42	$	1.27
8.82-13.34		1,526		6.4		10.78		6		12.38
14.46-21.84		2,666		3.7		18.54		1,843		18.97
21.93-54.35		255		1.9		28.93		231		29.51
60.44-72.00		4		0.4		65.35		4		65.35

		4,506		4.5	$	16.35		2,126	$	19.84


Issuance upon exercise of stock options and grants of restricted stock		5,135,647
Issuance upon conversion of subordinated debt		5,350,934

	Total shares reserved	10,486,581

		December 31,

		2009			2008
Deferred tax assets:
	Inventory valuation	$	13,261		$	15,094
	Domestic net operating loss carry forwards		39,312			31,644
	Tax credit carry forwards		24,216			23,618
	Foreign net operating loss carry forwards		834			692
	Purchased intangible assets		6,662			7,335
	Warranty and installation accruals		2,432			2,261
	Equity compensation		4,659			3,175
	Other accruals		1,654			3,240
	Depreciation		1,815			—
	Other		3,235			3,156

Total deferred tax assets			98,080			90,215
Valuation allowance			(84,723	)		(78,706	)

Net deferred tax assets			13,357			11,509
Deferred tax liabilities:
	Depreciation		—			27
	Purchased intangible assets		8,439			8,482
	DISC termination		201			402
	Noncontrolling interest		—			426
	Convertible debt discount		3,072			4,239
	Undistributed earnings		3,292			—
	Other		287			288

Total deferred tax liabilities			15,291			13,864

Net deferred taxes		$	(1,934	)	$	(2,355	)

	December 31,

	2009			2008
Beginning balance as of December 31	$	694		$	1,386
Additions for tax positions related to current year		725			70
Reductions for tax positions relating to current year		—			—
Additions for tax positions relating to prior years		—			165
Reductions for tax positions relating to prior years		(62	)		(597	)
Reductions due to the lapse of the applicable statute of limitations		—			(330	)
Settlements		—			—

Ending balance as of December 31	$	1,357		$	694

	LED & Solar Process Equipment			Data Storage Process Equipment			Metrology			Unallocated Corporate			Total

Short-term liability
Lease-related costs 2008	$	—		$	—		$	259		$	1,189		$	1,448
Personnel severance charges 2008		732			477			879			1,405			3,493

Total charged to accrual 2008		732			477			1,138			2,594			4,941

Lease-related costs 2009		190			803			13			—			1,006
Personnel severance charges 2009		1,005			1,826			2,830			636			6,297

Total charged to accrual 2009		1,195			2,629			2,843			636			7,303

Short-term/long-term reclassification 2008		—			—			—			892			892
Short-term/long-term reclassification 2009		—			148			—			1,084			1,232
Cash payments 2008		(72	)		(207	)		(604	)		(1,627	)		(2,510	)
Cash payments 2009		(1,502	)		(2,561	)		(3,362	)		(1,982	)		(9,407	)

Balance as of December 31, 2009	$	353		$	486		$	15		$	1,597		$	2,451

Long-term liability
Lease-related costs 2008	$	—		$	—		$	—		$	2,684		$	2,684
Lease-related costs 2009		—			377			—			—			377
Short-term/long-term reclassification 2008		—			—			—			(892	)		(892	)
Short-term/long-term reclassification 2009		—			(148	)		—			(1,084	)		(1,232	)
Other adjustments		—			—			—			(172	)		(172	)

Balance as of December 31, 2009	$	—		$	229		$	—		$	536		$	765