ASMI announces its Roadmap to Front-end Peer Group Profitability

Market Wire, April, 2008

A comprehensive operating plan combined with organisational changes to increase focus on Front-end profitability and create shareholder value

Bilthoven, the Netherlands, April 28, 2008 -- ASM International N.V. (NASDAQ: ASMI and Euronext Amsterdam: ASM) today announced details of its plan to achieve operating profit margins for its Front-end business in line with its peer group in 2009.

The company also announced a significant change to the organisational structure of the Front-end business.

Highlights of the Roadmap

Financial

Strong management commitment to reach peer profitability in 2009

  * Revenue growth above market growth
  * Expand operating profit margins of the Front-end business to
    11-13% in 2009, from 3.4% in 2007
  * Increase cash generation by reducing relative working capital by
    EUR 30m from 2007 to the end of 2009 and limiting total net capex to
    EUR 30-35m for the combined period 2008 and 2009

As part of its preliminary 2008 first quarter results for the Front-end, the company announced an improved net earnings break-even level of around EUR 90m amid challenging markets vs. EUR 110m on average in 2007, an indication that initiatives introduced in 2007 are starting to yield results.

For 2010 and beyond ASMI expects to continue to outgrow the market and to achieve operating profit margins at the top half level of its peer group.

Organisation and Operations

  * Create a truly global organisation with focus on
    commercialisation of our strong product portfolio
  * Appoint VP Global Sales and Service, VP Global Operations and VP
    Front-end Products
  * Review incentive structure and alignment with the new
    organisational structure
  * Continue FEMS, global sourcing initiative and production platform
    reduction to further improve gross margin
  * Divest RTP and NP product lines
  * Close head office in Bilthoven and move to Almere

Mr Chuck del Prado, chief executive, commented:

"The plans we have announced today are ambitious, but also deliverable. They build on the significant investments we made in our Front-end product lines in the first half of this decade and the progress made over the past two years to improve profitability and represent an acceleration of the ambitions of ASMI. We recognize that the profitability of our Front-end business needs further improvement. We are committed to change and have made hard choices to further accelerate the commercialisation of our Front-end business. We believe our technology leadership and strong market positions ideally position our Front-end business to deliver superior growth.

In the Front-end business we continue to make good progress decreasing cost levels and improving profitability, despite the challenging operating environment. The changes we are making to the focus, organisation and culture of the company will propel growth and transform the cost structure of the Front-end business and pay further benefits when market conditions start to improve,

As new CEO I am strongly committed, together with the team, to aggressively realise the upside potential of the Front-end business and deliver value to our shareholders".

Contacts:

Mary Jo Dieckhaus                            1 212 986 29 00
Erik Kamerbeek                                 31 30 229 85 00

Background

ASM International consists of two businesses - the 53.1% owned Back-end business, ASM Pacific Technology (ASM PT); and the 100% owned Front-end business. Today's announcement focuses on the actions the company is taking to meet its target of achieving peer-group profitability in the Front-end business in 2009 and outlines its vision for 2010 and beyond.

In the late 1990s, the evolution of the Front-end business was seriously damaged by a protracted patent dispute with Applied Materials, which led to costs of approximately $120m for the company. At the same time ASMI was forced to spend heavily to retool the Front- end business so that it had a product suite fit for market. This essential investment programme - focused on repositioning the product portfolio in 300mm - was financed by use of dividends from the ASM PT business.

By 2006 this process was substantially completed. The Front-end business had built up an excellent IP portfolio with strong market positions. As a result, the focus was shifted in 2006 to profitability.

Progress in 2006 and 2007

In furtherance of the aim for peer group profitability, ASMI announced a number of financial targets in 2006 for its Front-end business:

2006 - Become EBITDA positive (Result: EBITDA of EUR 17m)
2007 -  Achieve  positive  net  earnings  (Result:  net  earnings  of
EUR 7.7m[1])
2009 - Achieve peer group profitability

The company met both its 2006 and 2007 targets and improved EBIT by nearly EUR 50m over these two years. The Front-end operations remain less profitable, however, than their peers, with a 3.4% EBIT margin in 2007 compared to a peer group average of 9.1% over the calendar year 2007.[2] It was in order to close this gap that the company articulated the third target in 2006 - achieve peer group profitability in 2009.