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Gabi SeligsohnThank you, Kenny. Hello, everyone and welcome to our first quarter of 2012 conference call. The first quarter of 2012 marked a very good start for the year. Our revenues during the first quarter were up by 18% versus the fourth quarter of 2011. Our revenues came in at the upper hand of our guidance and operating margins exceeded our expectations as a result of favorable product mix. During the quarter, we executed per our communicated plans which included a carefully managed increase in our operating expenses. These development efforts are critical to allow us to continue and improve our market position. While the fourth quarter of last year marked the initial phase of the 28 nanometer ramp up in foundries, we are now clearly in full swing. Moreover as recently reported by some of our leading customers there seems to be a severe shortage of capacity limiting short-term growth potential of some leading device manufacturers who feed the tablet and smartphone markets. This situation has led some of our key customers to announce an increase in their prime CapEx for this year and add capacity faster than they previously planned. Since all leading foundries are our customers and all want to play a significant role in this current ramp up, all are either qualified or in the qualification for the relevant technology node which puts us in a favorable position since we have been designed in with all of them for quite some time. On the memory side of our business, CapEx has so far been limited as a result of low average selling prices on the device level as well as short-term capacity efficiency. We expect CapEx in memory, both in DRAM and NAND not to significantly improve before the end of the year or even the beginning of next year.
We recently posted several important announcements, signifying both an increase in business volumes as well as technological wins for our product. The first was for winning a tool selection for development of 11 and 40 nanometer technology nodes at a leading edge logic manufacturer. This win was of strategic importance to us as it covers the most critical manufacturing steps of lithography, Etch and CMP both in the frontend and backend of the file.We also announced the addition of another foundry customer for our integrated metrology platform and commented that we expect this particular win to generate significant business for us in the future. Now to give you some additional insight, let me review what happened during the first quarter. Our focus on the foundry segment and the strong position we have achieved there over the past two years are clearly paying off. As stated the ramp up in foundries at 28 nanometers is very significant. Both our main product lines, integrated metrology and standalone are benefiting. Given the strengthening competition amongst foundries, customer focus also include investments in the next two technology node both 20 nanometers and 40 nanometers. As stated in our last call, we expect to continue to receive orders for these two technology nodes in coming quarters and indeed got some orders during the first quarter as well. In light of supply shortages and the implications on device manufacturer's ability to support their customers' events, we expect device manufacturers who place orders with foundries to continue to get closer to the fabs as time passes. We have recently received more indications that optical CD measurements play a significant role in data sharing between the fabs and their customers providing further evidence of the strategic role our technology plays in next-generation device manufacturing. This is most pronounced in the more critical steps of gate fabrications where on the one hand, process complexity is highest and on the other hand yield requirements and process tolerances are [tidiest].
From a wider market perspective and as mentioned memory spending continues to be low. Though we are seeing some capacity increases in NAND flash and DRAM, we expect customers to only change gears toward the end of 2012 or the beginning of 2013. With the technology transition for 30 nanometers and DRAM already in place at most customers, we expect that most if not all of the next ramp will be focused on below 30 nanometers.Read the rest of this transcript for free on seekingalpha.com