Newport Corporation Company Overview

Newport Corporation Company Overview

Forward Looking Statements Other than the historical financial data, statements in this presentation are forward-looking statements that are based on current expectations and involve risks and uncertainties, as detailed in our SEC filings. Although we believe that the assumptions underlying the forwardlooking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking statements will be realized. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation that Newport's objectives or plans will be achieved. 2

Newport s Vision To Be the Premier Global Resource for Customers Who Need to Make, Manage and Measure Light Expanding on a 35-Year Legacy of Innovation in Photonics 3

Integrated Supplier Newport Corporation NASDAQ : NEWP Based in Irvine, CA Founded 1969 2000 Employees 2004 Merger with Spectra-Physics Est. 2005 Sales about $400M Key Markets Served Scientific Research Life & Health Sciences Microelectronics Aerospace and Defense/ Security 4

Meeting the World s Optical Challenges SHRINKING MICROELECTRONICS MINIATURIZING COMPONENTS BREAKTHROUGH MICROSCOPY HIGHER THROUGHPUT IMAGING ADVANCING RESEARCH IMPROVING QUALITY OF LIFE 5

A Large and Growing Photonics Market Market Growth is Paced by New Generations of Applications 2005 2008 CAGR R&D $820M $900M 3.5% Microelectronics $1,450M $1,930M 10% Life & Health Sciences $600M $800M 10% Industrial $1,800M $2,025M 4% $4.6B $5.6B -Internal Newport estimates for light sources, subsystems & accessories 6

Putting Light to Work.Traditional Strategy Customers & Markets Research & Defense Microelectronics Life & Health Sciences Other Industrial Sales & Distribution Lasers OptoMech & Optics Motion Instruments Products Lasers OptoMech & Motion Instruments Optics 7

New Newport Business Model Customers & Markets Research & Defense Microelectronics Life & Health Sciences Other Industrial Applications, Integrated Solutions, & Services -Performance Matched Products -Light Engines ` Products Lasers OptoMech & Motion Instruments Optics 8

The Newport Laboratory Solution Photonics Technology Store Lasers & Light Sources One Source Optics Light Measurement Crystals Web Resource Catalog 100,000 /yr Vibration Isolated Platforms Optical Hardware Filters & Coatings E-commerce Monochromators 200,000 visitors /Qtr Diffraction 3M page views / Qtr Gratings Spectrographs Precision Motion Control Research Sales 39% of Total Worldwide Sales 9

Today s University Research Experiment is Tomorrow's Commercial Product Need to Leverage Connections to Fundamental R&D in University Research Labs to Grow in Strategic Areas Fundamental Science Research Difficult for Companies in Today s Environment Reduced Product Development Timelines Focus on Applications Specific Solutions Transition from Research to Market 10

Newport OEM Solution for Life & Health Sciences High-Performance Subsystems for Diagnostic Equipment Semiconductor Lasers Isolation Platforms Optical Hardware Crystals Life and Health Sciences Sales 17% of Total Worldwide Sales Filters & Coatings Diffraction Gratings Application Segments Served Multi Photon Microscopy (Cancer) Flow Cytometry (Blood / Fluid ) DNA Sequencing (Genomic) Dermatology (Therapeutic / Cosmetic) Dentistry Ophthalmology (Diagnostic / Corrective) Chemical Analysis (Spectroscopy) 2005-2006 2006 CAGR 13% 11

What Is A Light Engine? More Than the Light Source..Putting the Light to Work Lasers & Light Sources Opto-Mechanical Components Precision Optical Elements Platform/Support Structure Optics Crystals Filters Diffraction Gratings 12

Future Laser Technology Trends Diode Lasers Ultrafast Lasers Laser Technology Trends New Gain Materials New Architectures 13

Diode Laser Technology Improvements Diode Lasers Improved Wavelength Control Volume Bragg Gratings Quantum Dots Reduced Thresholds Integrated Wavelength Control 14

Diode Laser Application Areas Materials Processing Pump Sources for DPSS Lasers Graphic Arts and Display Medical 15

State-of-the-Art Commercial Ultrafast System Integrated Pump 110 V Closed Cycle Cooling Solid-State Gain Media More Than 2.5 W Of Power < 100 Fs Pulses Complete Computer Control With No Adjustment Knobs MaiTai HP 16

Laser Technology Trends New Gain Materials Ytterbium Dopants Direct Diode Pumping Less Heating Ceramic Hosts Large Sizes Better Thermal Characteristics Yb:KYW Eclipse 17

Femtosecond Materials Processing Industrial Manufacturing Machining Of Precise Structures Fuel Injector Nozzles Ink Jet Nozzles Cardiovascular Stents and Other Medical Implants MEMS Photo Mask Repair Laserzentrum Hannover (LZH), Hannover, Germany 18

Ultrafast Materials Processing Cardiovascular Stents A. Ostendorf, Laserzentrum Hannover (LZH), Hannover, Germany 19

New Laser Architectures Architectures Addressing Some DPSSL Disadvantages Thin Disk Lasers Reduced Thermal Issues Efficient Cooling Good & Stable Beam Quality Fiber Lasers Double-clad Concept: Efficient Brightness Conversion Power Doubling Every Year 20

BioPhotonics Energy Multiphoton Microscopy S 1 hν hν hν 1- photon 2-photon 488 nm 900 nm S o Sample Two Photon Absorption Only in Focus No Out-of-Focus Emission Photobleaching Restricted to Focus Reduced Photobleaching Low Scatter: High Penetration Depth Live Cell Imaging 21

Multiphoton Confocal Imaging With Mai Tai Multi-Labeled Endothelial Cells, Excited at 750nm Rebecca Williams & Warren Zipfel, Cornell University 22

Photonics Market Summary The Promise of Photonics in Industry is Being Realized from its Role as an Enabling Technology Great Advances in Light Source Technology Resulting from Telecom Boom of 1990 s Industrial Applications of Photonics Benefit When There is a Bridge from Lab to Commerce Ultimate Economic Success is Realized When a Commercial Product Embodies a Solution Not Technology Like Electronic Component Evolution, Integration of Optical & Mechanical Technology Will Yield Enabling and Cost Effective Light Engines Advancing Photonics Further 23

Financial Review

Seven Quarter Sales and Orders Trend Strong Base Diverse Market Mix Orders Mix By Market $M 96 96 105 98 98 97 103 99 102 98 102 103 99 99 100% 80% 60% 40% 20% Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 Q3 '05 0% Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 Q3 '05 Micro-Electronics Research Life & Health Science All Other Orders Sales Steady Performance Book to Bill > 1 Five out of Seven Quarters Q3 Sales at All Time High Sales and Orders Growth Forecasted for Q4 05 ($103 - $106 Million) Sales Expected to Grow 5 10% in Fiscal Year 2006 Robust and Balanced Product Offering for Customers in Diverse Industry Segments Sales And Orders In Millions, And As If Newport And SP Combined For All Periods. 25

Quarterly Orders, in Millions USD 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 Six Quarters Pro Forma Orders (As If Newport and SP Were Always Combined) Q3 '05 Research Research Orders Subject to Seasonality. Forecasting Strong Q4 05. Microelectronics Life & Health Sciences Industrial/Other Microelectronics Supported by Large Computer Peripherals Orders in 2005. Front-end Semiconductor Has Been Slow All Year. Expect Improved 2006. LHS, Industrial and Other Showing Positive Trajectory 26

Strong Financial Position EPS By Quarter 2005 12 13 17 17-19 Q3 2005 Q1 '05 Q2 '05 Q3 '05 Q4 '05 F/C EPS: Cents Per Share From Continuing Operations and Before Extraordinary Items. Operating Income as Percent of Sales 2005 8.4% 9.1% 7.2% 6.6% Recent Price $ 13.60 52 Week Range $11.63 - $16.35 Market Capitalization (Millions) $ 543.2 Shares (Millions) $ 39.9 Cash Per Share $ 1.59 Book Value Per Share $ 9.28 Tangible Book Value Per Share $ 3.58 Price to Book 1.5X Forward P/E (2005 EPS) 23.1 Price to Sales (2005 Sales) 1.3X Q1 '05 Q2 '05 Q3 '05 Q4 '05 F/C Operating Income as Percent of Sales for Q4 05 Represents Estimate Based On Guidance Provided October 27, 2005. Op Income Percent and EPS Have Increased Each Quarter of 2005. We Anticipate Growing Op Income Percent and EPS Again In Q4 05. Overall Strong Financial Position Entering 2006 27

Financial Guidance for 2005 and 2006 2005 Guidance 2006 Guidance Sales (in Millions) $403 - $406 $420 - $440 Gross Margin Approx 42% Improved Earnings Per Share Excluding Stock Options $0.57 - $0.59 $0.81 - $0.94 Including Stock Options $0.41 - $0.43 $0.65 - $0.78 We are Well Positioned to Drive Shareholder Value by Leveraging Sales Growth into Very Solid Increases in Earnings Per Share 28

Newport s Opportunity in Photonics Newport is Positioned to Serve the Broader Photonics Industry Better Than Competitors Offering Only Laser Technology Newport s Best-in-Class Product Portfolio Allows Us to Provide Customers with Solutions, Not Merely Products Customers (Research and OEM) Increasingly are Looking to a Single Source for Photonics Products Profit Potential is Greatly Enhanced With Completion of the Acquisition Integration Program 29

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