Verigy Limited (Verigy) reiterated its 3Q 09 revenue and gross margin guidance on 08 July 2009. The company does not expect revenues from recently acquired Touchdown Technologies during 3Q 09 and has not yet factored the overall impact into its company target model. The company also announced a proposed offering of US$110 mn convertible notes maturing in 2014 along with an additional US$16.5 mn to cover over-allotment. The company expects to utilize net proceeds from the offering for general business purposes including funding potential acquisitions, strategic transactions and working capital requirements. Our outlook for the company is not significantly impacted and we maintain our HOLD rating for Verigy at current price levels. We will reassess the NASDAQ common stock rating and target price for Verigy when we reassess the stock in our next full update report. As we now anticipate a negative currency impact on the European stock over our investment horizon and expect to reduce our target price in our next update report, we maintain the European stock a HOLD at current levels although the current target price does not support a HOLD rating. We will reassess the European stock rating and target price for Verigy when we reassess the stock in our next full update report.

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Verigy Limited’s (NASDAQ:VRGY) 2Q 09 results exceeded our and market expectations across the board, and Management’s 3Q 09 total net revenue and gross margin forecasts also exceed our previous expectations. We are likely to revise estimates upwards in line with the 2Q 09 results and better-thanexpected Management guidance. However, we remain concerned regarding weakness in the equipment market over the medium term due to limited visibility in the global demand pattern and hence we maintain our HOLD rating for Verigy at current levels. We will reassess the NASDAQ common stock rating and target price for Verigy when we reassess the stock in our next full update report. We now anticipate a negative currency impact on the European stock over our investment horizon and expect to reduce our target price in our next update report, despite the improvement of our fundamental outlook. Consequently, we downgrade the European stock from a BUY to a HOLD at current levels although the current target price does not support a HOLD rating. We will reassess the European stock rating and target price for Verigy when we reassess the stock in our next full update report.

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Verigy derives a significant portion of its revenues from Outsourced Semiconductor Assembly and Test (OSAT) manufacturers and sub-contractors (41% of total net revenue in 1Q 09). Demand for consumer electronics products has improved in Mainland China due to the stimulus package implemented by the Chinese government; consequently back-end companies have reported improving utilizations during the quarter. Accordingly, we believe an up-tick in orders by OSAT customers will start for Verigy in the medium term. Moreover, we believe that the company’s order book will bottom out in the coming quarter and new order numbers will start to recover in the latter half of 2009 based on our assumption of leaner channel inventory and marginal seasonal recovery in demand during the later part of the year. However, despite the positive developments outlined, we still expect to see a steep fall in top-line in FY 2009 (-60.3% y-o-y), in line with leading Automated Test Equipment (ATE) vendors including Advantest Corporation and Teradyne Inc. as a result of increasing production cuts by semiconductor companies. ATE vendors have faced dismal conditions since the second half of 2007 as significant overcapacity in the memory segment and later the weakening economy have dampened any new capital investments. On 09 March 2009, Gartner Inc. forecast a 34.2% y-o-y decline in global semiconductor test equipment sales in 2009. Despite the cost-reduction efforts by Management to lower breakeven levels, we expect the company to continue reporting operating losses into FY 2010 due to a weak top-line performance. However, we expect cost reduction efforts by Verigy to boost margins once demand recovers.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (‘Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2009 Independent International Investment Research PLC. All rights reserved.

Verigy Limited’s (Verigy) NASDAQ common stock price has declined substantially since our previous update report, reflecting both financial market conditions, and the impact of continued weakness in the semiconductor industry, with 1Q 09 results deteriorating badly. In view of further weakening in end-market demand, we anticipate severe cuts in semiconductor capital spending to continue in 2009. As a result, we hold a weak outlook for the company and maintain our HOLD rating for Verigy, although the current price does not suggest a HOLD. We will reassess the NASDAQ common stock rating and target price for Verigy in our next full update report. Although the target price does not support a HOLD rating at current levels, and despite our anticipation of a positive currency impact on the European stock in the medium term, we reiterate the European stock rating a HOLD in view of our fundamental outlook. We will reassess the European stock rating and target price for Verigy in our next full update report.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (‘Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2008 Independent International Investment Research PLC. All rights reserved.

Verigy Limited’s (Verigy) 1Q 09 results were below our previous expectations, but reflected revised Management guidance. With the impact of the seasonally slow quarter of the year compounded by severe deterioration in end-market demand, we anticipate semiconductor companies to curb capital spending even further. As a result, we continue to hold a weak outlook for the company in the near term and maintain our HOLD rating for Verigy, although the current price does not suggest a HOLD. We will reassess the NASDAQ common stock rating and target price for Verigy in our next full update report. Although the target price does not support a HOLD rating at current levels, and despite our anticipation of a positive currency impact on the European stock in the medium term, we moderate the European stock rating from a BUY to a HOLD in view of our reduced fundamental outlook. We will reassess the European stock rating and target price for Verigy in our next full update report.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (‘Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2008 Independent International Investment Research PLC. All rights reserved.

On 09 February 2009, Verigy Limited (Verigy) lowered its total net revenue guidance for 1Q 09, as a result of degenerating end-market demand and non-payment from a large memory customer for several systems previously shipped. Revenues are anticipated to be significantly negatively impacted throughout 1H 09. In light of the disappointing Management outlook, the NASDAQ common stock experienced severe downward pressure in after hours trading, declining 15.8% on 09 February 2009. The company’s 1Q 09 guidance falls significantly below our previous expectations. Subsequently, and also reflecting current price levels, we downgrade the Verigy NASDAQ common stock from a BUY to a HOLD rating. We will reassess the NASDAQ common stock rating for Verigy after the company announces its 1Q 09 results. We maintain our current BUY rating for the European stock in anticipation of a significant positive currency impact in the medium term. We will reassess the European stock rating for Verigy after the company announces its 1Q 09 results.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (‘Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2008 Independent International Investment Research PLC. All rights reserved.

Verigy Limited’s (Verigy) revenue deteriorated steeply y-o-y in 4Q 08, reflecting a severe decline in orders as customers delayed capex plans as a result of deteriorating end-market demand. Results were below our as well as Management expectations. Total net revenue is expected to deteriorate further and we expect losses over the next two years as the company bears the brunt of further capex cuts by customers. Nevertheless, the stock price has fallen significantly since our previous update report and we believe that Verigy, which has been gaining market share, offers upside potential from current levels.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (‘Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2008 Independent International Investment Research PLC. All rights reserved.

Verigy Limited’s (Verigy) 4Q 08 results were below our expectations. Moreover, Management’s 1Q 09 guidance also falls short of our previous expectations. Accordingly, we will reduce our estimates and target price when we come to revalue the stock in our next full update report. Hence, we maintain our HOLD rating for Verigy, although the current price suggests a BUY. Despite our weak fundamental outlook, we maintain our current BUY rating for the European stock in anticipation of a positive currency impact in the medium term.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (‘Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2008 Independent International Investment Research PLC. All rights reserved.

Verigy Limited’s (Verigy) NASDAQ common stock has declined substantially since our rating downgrade in our previous company news alert, reflecting continued weakness in the semiconductor industry and worsening investor sentiments. On 19 November 2008, the Semiconductor Industry Association cut its forecasts for 2008 and 2009, now expecting the global semiconductor industry to contract in 2009, the first time since 2001. In view of contracting semiconductor end-market demand and the resultant anticipated reduction in capital spending in 2009, we intend to revise downward our estimates and target price going forward. Hence, we maintain our HOLD rating for Verigy, although the current price suggests a BUY. We maintain our current BUY rating for the European stock in anticipation of a positive currency impact in the medium term.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (‘Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2008 Independent International Investment Research PLC. All rights reserved.

Verigy Limited’s (Verigy) NASDAQ common stock has declined 24.2% since we maintained the rating a BUY in our company news alert dated 06 October 2008, reflecting the further deteriorating economic outlook and investor sentiments. In view of rapidly contracting semiconductor end-market demand and the resultant anticipated reduction in capital spending in 2009, we are likely to revise downward our estimates and target price going forward. Subsequently, we downgrade the Verigy NASDAQ common stock rating from a BUY to a HOLD even though the rating supports a BUY at current levels. We maintain our current BUY rating for the European stock as we now anticipate a significant positive currency impact on the European stock in the medium term.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (‘Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2008 Independent International Investment Research PLC. All rights reserved.

Verigy Limited’s (Verigy) NASDAQ common stock price has witnessed a substantial decline since our 3Q 08 update report, reflecting overall weakness in global stock markets and the poor near term outlook for the semiconductor industry. Although we remain concerned about the near term economic prospects, we believe the recent decline in the common stock price provides an attractive investment opportunity at current levels. Therefore, we maintain our current BUY rating for the NASDAQ common stock. Despite marginal anticipated negative currency impact in the medium term, we maintain our current rating for the European stock based on our fundamental outlook and current price levels.

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In 3Q 08, Verigy Limited’s (Verigy) total net revenue declined 12.3% y-o-y, reflecting deterioration in its Products segment. Going forward, although we expect continued acceptance for the company’s System on Chip (SOC) products including 93K HSM and Port Scale RF products, top-line and margin performance is expected to be limited by persistent weakness in the memory market. Moreover, the timeline of recovery in the semiconductor market in general and the memory market in particular remains uncertain. Subsequently we have revised downwards our total net revenue and margin estimates for FY 2008 and FY 2009. Nevertheless, given the recent decline in NASDAQ common stock price, we believe the stock provides an attractive investment opportunity at current levels.

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Verigy Limited’s (Verigy) NASDAQ common stock has declined approximately 20% since our previous update report on 22 August 2008 reflecting weak 4Q 08 guidance, which fell short of market expectations. It is likely that we will reduce our estimates to reflect Management guidance when we revalue the company. However, we believe the recent decline in the common stock price provides an attractive investment opportunity at current levels. Therefore, we maintain our current BUY rating for the common stock. We maintain our current BUY rating for the European stock based on the company’s fundamental rating and an expected positive currency impact over the medium term.

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Verigy Limited’s (Verigy) 3Q 08 total net revenue was in line with our estimate, however, net performance exceeded our expectations. Management’s 4Q 08 guidance falls short of our expectations and it is possible that we will reduce our estimates when we come to revalue the stock. However, we do not expect a significant change in our rating and hence maintain our current BUY rating for the NASDAQ common stock. As we continue to expect a positive currency impact on the European stock, therefore we reiterate the European stock a BUY based on fundamental grounds.

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2Q 08 results were mixed for Verigy Limited (Verigy). While total net revenue in the quarter declined 11.5% y-o-y reflecting weakness in the memory market, gross margin posted a robust y-o-y expansion, reflecting a better product mix and Management’s cost reduction efforts. On the other hand, a y-o-y increase in non-US GAAP operating expenses resulted in adjusted non-US GAAP operating margin3 declining 336 bps y-o-y in the quarter. Notwithstanding a weak semiconductor environment, we expect increasing acceptance of the company’s products and Verigy’s focus on high growth markets to support growth for the company going forward. However, we remain conservative in view of the ongoing weakness in the semiconductor market and hence have left our total net revenue estimates for FY 2008 and FY 2009 almost unchanged. However, we have revised upwards our margin estimates to reflect expectations of a higher than previously anticipated adjusted non-US GAAP gross margin3 and lower than anticipated Selling, general and administrative expenses (SG&A) expenses as a percentage of total net revenues. We remain optimistic about the growth prospects of the company and maintain our positive outlook for the Verigy NASDAQ common stock.

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Verigy Limited’s (Verigy) NASDAQ common stock achieved our target price on 27 May 2008. We believe the appreciation in the common stock price primarily reflects the better-than-anticipated 2Q 08 results and Management guidance. Verigy’s 2Q 08 results exceeded our expectations and Management’s 3Q 08 guidance is above our expectations. Accordingly, we will be revising our estimates upwards when we come to revalue the stock in our next full update report and hence maintain our current BUY rating for the NASDAQ common stock. We maintain our current HOLD rating for the European stock in view of the anticipated negative currency impact on the stock over the medium term.

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Although Verigy Limited’s (Verigy) 2Q 08 total net revenue was in line with our estimate, margins exceeded our and market expectations. Moreover, Management’s 3Q 08 guidance exceeds our expectations. As a result, it is likely that we will revise upwards our estimates when we come to revalue the stock in our next update report. Accordingly, we maintain our BUY rating for the NASDAQ common stock. As we continue to anticipate a negative currency impact on the European stock, we downgrade the European stock from a BUY to a HOLD.

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