Semiconductor devices, also referred to as integrated circuits, or ICs, are the fundamental building blocks used in all electronic systems. They have played an important role in enabling the proliferation of computing, communications and consumer electronic products. As technology continues to penetrate most aspects of daily life, semiconductor devices are playing an increasingly important role in a growing number and variety of products. Consequently, the global semiconductor industry, while experiencing significant cyclical fluctuations in its growth rate, has exhibited strong overall growth over the last 30 years. With the continued development of new growth segments within the semiconductor market, it is believed the semiconductor market should continue to experience periods of strong growth. According to estimates from Gartner, an industry research firm, the global semiconductor market will grow from $220 billion in 2004 to over $302 billion in 2008, driven primarily by the convergence of consumer, computing and communications devices.

The design and manufacture of semiconductor devices is a complex and capital-intensive multi-step process. This process involves different types of equipment used to manufacture, assemble and test semiconductor devices. Semiconductor test equipment and services are a critical part of this complex design and manufacturing process, and are utilized in each of the key design and manufacturing stages.

The Company’s 93000 Series platform, introduced in 1999, tests SOCs, SIPs and high-speed memory devices, which are used in a very wide range of electronic products including MP3 players, digital televisions, television set-top boxes, PCs, gaming consoles and cell phones and other wireless communication devices. The scalability and flexibility of the 93000 platform, enabled by its advanced, innovative test technology, allows it to cover the testing requirements for a wide range of devices and applications in all stages of bringing a semiconductor product to market, from production prototype to high-volume manufacturing, assisting device manufacturers in speeding time to market and lowering the overall cost of test.

The Company’s Versatest V5000 Series platform, introduced in 2004, tests flash memory, SRAM, DRAM and mixed memory devices contained in a very wide range of electronic products. It can also test multi-chip packages containing single or multiple types of memory, addressing the emerging use of MCPs to satisfy the increasing memory requirements of consumer electronics devices. Different systems are available that can be optimized for wafer test, final test or engineering development. The flexibility of this platform ensures that customers can test a number of different memory types at different stages of manufacturing, allowing them to change their mix of products without having to change test platforms.

Net product revenue in fiscal year ended October 31, 2005 was $355 million, a decrease of $146 million, or 29.1%, from the $501 million achieved in fiscal year ended October 31, 2004.

Cost of products in fiscal year ended October 31, 2005 was $228 million, a decrease of $35 million, or 13.3%, from the $263 million achieved in fiscal year ended October 31, 2004.

Cost of services in fiscal year ended October 31, 2005 was $88 million, a decrease of $3 million, or 3.3%, from the $91 million achieved in fiscal year ended October 31, 2004.