Filed by Nanometrics Incorporated
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Commission File No. 000-13470
Subject Company: Nanometrics Incorporated
 Investor Presentation February 2006 |
Who is Nanometrics? Who is Nanometrics? A leading provider of integrated and stand-alone metrology and process control technology to the global semiconductor manufacturing industry |
 What’s Driving the Semiconductor Industry Today? What’s Driving the Semiconductor Industry Today? • • Consumer electronics surpassing PCs Consumer electronics surpassing PCs • • Accelerated development timeline Accelerated development timeline • • New chips require 300mm processing New chips require 300mm processing – SOC, DDR2, Flash • • Majority of industry profits driven by: Majority of industry profits driven by: – Newly-released products – Highest performance devices • • New Fabs New Fabs in Asia—Korea and Japan in Asia—Korea and Japan |
 Semiconductor Manufacturing in the 300mm Era Semiconductor Manufacturing in the 300mm Era As market windows are collapsing… Manufacturing is increasingly expensive, more automated… …taking people out of the cleanroom altogether. |
 Increasing Importance of Process Control Increasing Importance of Process Control Growing Share of Semiconductor Capital Spending Growing Share of Semiconductor Capital Spending Source: Dataquest |
   Larger Wafers Require More Metrology Larger Wafers Require More Metrology - - More mask layers More mask layers - - More process steps More process steps - - More single-wafer processes More single-wafer processes - - More importance placed on each wafer ($$) More importance placed on each wafer ($$) - - More metrology points on each wafer More metrology points on each wafer More metrology More metrology tools required tools required per line per line |
 Trends Driving Integrated Metrology Trends Driving Integrated Metrology • • Accelerating ramp to production Accelerating ramp to production – Speed up the learning cycle • • Improved production economics Improved production economics – Throughput – Footprint – Transport • • Every wafer is valuable Every wafer is valuable – Catch problems early • • Increasing automation and fab-wide advanced Increasing automation and fab-wide advanced process control (APC) process control (APC) – Requires metrology feedback loop |
  Integrated Improves Productivity Integrated Improves Productivity * * * * 3 mins Travel Time 30 secs 30 secs 100 WPH 90 WPH 100 60 w/min X 6 min = 10 wafers Lost Productivity 2 mins Measurement Time When running qualification cycles.. Productivity Loss = 10% without Integrated Metrology |
                   It’s About More than Maximizing Yield It’s About More than Maximizing Yield ASPs Profit captured getting to 80% yield one quarter faster Incremental revenue for increasing yield from 95% to 99% Semiconductor Product Life Cycle Semiconductor Product Life Cycle Time Conventional ramp Ramp accelerated with Integrated Metrology |
 USA 34% Japan 26% Korea 25% Taiwan 11% Other 4% Integrated 38% Stand- Alone 56% Other 6% Nanometrics Today Nanometrics Today • • 30 years in the business 30 years in the business • • Leading provider of transparent thin film metrology Leading provider of transparent thin film metrology • • Market flexible, multiple-metrology solutions for both Market flexible, multiple-metrology solutions for both integrated and stand-alone applications integrated and stand-alone applications • • Financially sound and poised for growth Financially sound and poised for growth • • Acquiring Accent Optical Technologies for ~$80 million * Acquiring Accent Optical Technologies for ~$80 million * – Based on 5 million shares at $14 plus $10.6M debt * The transaction is subject to approval of Nanometrics and Accent shareholders and is expected to be completed in 1H 2006. |
     Constant Innovation, Expanding Product Line Constant Innovation, Expanding Product Line Core Products with Leading Market Share Atlas/FLX - Transparent Film Thickness 9010/BOLTS - Dielectric CMP, CVD New Products and Expanding Markets Orion - Advanced Overlay Control Atlas-M - Mask and Reticle Metrology NanoOCD - Optical CD Measurement 9010 UDI - Defect Detection Penetration into additional process steps: Track, Etch, Metal CMP |
 Who is Accent Optical? Who is Accent Optical? • • Metrology company offering several technologies: Metrology company offering several technologies: – Overlay metrology – Thin film metrology (film characterization, wafer mapping) – Optical CD – Defect detection • • Serving diverse markets: Serving diverse markets: – Semiconductor photolithography process control – Bare wafers/substrates: SSi, SOI… – Wireless/HBLEDs • • With strong history and financials With strong history and financials – 25 years in the business; buyout of Bio-Rad – HQ in Bend, Oregon with R&D/Mfg in York, England – 200+ employees – Healthy revenue run-rate and strong margins |
 Accent Acquisition Expected to Strengthen Position Accent Acquisition Expected to Strengthen Position • • Huge customer cross-selling opportunities Huge customer cross-selling opportunities • • Stronger player with greater scale Stronger player with greater scale • • Complementary technologies Complementary technologies • • Adds depth to management team Adds depth to management team • • Financial strength Financial strength • • Integrated metrology opportunity Integrated metrology opportunity |
     Nanometrics Addresses Large and Growing Markets Nanometrics Addresses Large and Growing Markets $0 $200 $400 $600 $800 $1,000 $1,200 2003 2005 2009 Non-Metal Thin Film Metrology Overlay Metrology Integrated Metrology Macro Defect Inspection Mask Metrology OCD/Profile Measurement $650 million $800 million $340 million 22% CAGR 51% CAGR Accent acquisition expected to add an additional ~$100 million to SAM Source: Dataquest |
   Expanding Presence in Key Markets Expanding Presence in Key Markets Non-Metal TF Integrated OCD/Profile Overlay Macro Defect Mask Tied for #2 with TWAV KLA #1, Rudolph #4, Accent #5 Leading Market Share Nova #2 KLA, TEL and Rudolph <$10M NANO a newer entrant; only one with integrated KLA and TWAV have majority of market Accent shipping tools NANO Shipping Tools KLA #1, Accent #2 In Development Stage KLA #1, August #2 Shipping Tools New Products for NANO Segment wedges denote relative market size in 2005 |
     Accent Top Customers Accent Top Customers Nanometrics Top Customers Nanometrics Top Customers Positioned with Customers at the Forefront of 300mm Positioned with Customers at the Forefront of 300mm - Other major - Other major |
 Nanometrics’ Growth Opportunities Nanometrics’ Growth Opportunities • • Increase in semiconductor capital spending Increase in semiconductor capital spending • • Greater importance of process control as % of CapEx Greater importance of process control as % of CapEx • • Growing market for NAND/Flash memory Growing market for NAND/Flash memory • • Increased adoption of Integrated Metrology Increased adoption of Integrated Metrology • • Introduction of new products in high-growth markets Introduction of new products in high-growth markets • • Market share gains vs Market share gains vs weak competition weak competition • • Growth through acquisition Growth through acquisition |
 Financial Overview Financial Overview Financial Overview |
 Creating Operating Leverage Creating Operating Leverage • • Streamlined business in 2005 Streamlined business in 2005 – Focus on semiconductors; sold FPD business • • Upgraded financial team Upgraded financial team – CFO, Chief Accounting Officer and Corporate Controller – Increased controls, better forecasting • • Re-organized operations and engineering Re-organized operations and engineering – Reducing costs through better manufacturing practices and improved material control processes • • Leveraging service organization Leveraging service organization – Keep spending flat, support more tools |
 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 Quarterly Revenues Annualized Scaling the Business Scaling the Business 2002 2003 2004 2005 |
  Fourth Quarter 2005 Financials Fourth Quarter 2005 Financials Revenue $ 14.2 M Gross Margin 46% Operating Expenses $ 9.1 M Operating Loss ($ 2.5 M) Net Loss ($ 2.1 M) EPS ($ 0.16) Cash and Short-Term Investments $ 45.4 M Total Debt $ 3.0 M |
  Significant Operating Leverage in the Model Significant Operating Leverage in the Model Recent Results Target Model * Product Gross Margin 52% 60% Service Gross Margin (12%) 20% Blended Gross Margin 43% 55% SG&A 32% 21% R&D 18% 14% Operating Margin (7%) 20% Re-organize Engineering Leverage Service Group * Excludes expenses from patent litigation, amortization of intangibles and equity-based compensation. |
 Conclusion: Nanometrics is in a Strong Position Conclusion: Nanometrics is in a Strong Position • • Right market segment Right market segment • • Well positioned with customers that are spending Well positioned with customers that are spending money on 300mm money on 300mm • • Right complement of products – Right complement of products – integrated and integrated and stand-alone metrology stand-alone metrology • • Opportunity for significant operating leverage Opportunity for significant operating leverage • • Consolidator of the metrology market Consolidator of the metrology market • • More than driving yield… More than driving yield… Accelerating the production ramp. Accelerating the production ramp. |
 Additional Information and Where to Find It Additional Information and Where to Find It In connection with the planned merger (the “Merger”) between Nanometrics, Inc. (“Nanometrics”) and Accent Optical Technologies, Inc. (“Accent”) pursuant to the Agreement and Plan of Merger and Reorganization dated January 25, 2006 (the “Merger Agreement”), by and between Nanometrics, Alloy Merger Corporation (a wholly owned subsidiary of Nanometrics) and Accent, Nanometrics and Accent will file a joint proxy statement/prospectus. Nanometrics intends to include in such proxy statement/prospectus a resolution for shareholder approval of the issuance of Nanometrics common stock in consideration for all the outstanding shares of Accent capital stock and the rights to acquire Accent capital stock (the “Share Issuance”), and certain other matters contemplated by the Merger Agreement. Accent intends to include in such proxy statement/prospectus a resolution for stockholder approval of the Merger Agreement and the Merger and certain other matters contemplated by the Merger Agreement. The joint proxy statement/prospectus will be mailed to the shareholders of Accent and Nanometrics. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED MERGER WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION. The joint proxy statement/prospectus will be filed with the Securities and Exchange Commission (“SEC”) by Nanometrics and Accent. Investors and security holders may obtain a free copy of the joint proxy statement/prospects (when it is available) and other documents filed by Nanometrics with the SEC at the SEC’s web site at www.sec.gov. The joint proxy statement/prospectus and these other documents may also be obtained for free from Nanometrics by directing a request to Nanometrics, Inc., 1550 Buckeye Drive, Milpitas, California 95035, Attention: Investor Relations, Telephone: (408) 435-9600 or by sending an email request to investors@nanometrics.com. |
 Additional Information and Where to Find It Additional Information and Where to Find It Nanometrics and its executive officers and directors may be deemed to be participants in the solicitation of proxies from Nanometrics’ and Accent’s shareholders with respect to the transactions contemplated by the Merger Agreement. Information regarding such officers and directors is included in Nanometrics’ Proxy Statement for its 2005 Annual Meeting of Shareholders filed with the SEC on August 4, 2005. This document is available free of charge at the SEC’s web site at www.sec.gov and from Nanometrics by directing a request to Nanometrics Incorporated, 1550 Buckeye Drive, Milpitas, California 95035, Attention: Investor Relations, Telephone: (408) 435-9600 or by sending an email request to investors@nanometrics.com. Accent and its executive officers and directors may be deemed to be participants in the solicitation of proxies from Accent’s and Nanometrics’ shareholders with respect to the transactions contemplated by the Merger Agreement. Information regarding such Accent directors and executive officers and their interests in the Merger will be included in the joint proxy statement/prospectus. This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. |
Forward Looking Statements Forward Looking Statements This communication contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, such as statements regarding the expected cost savings, impact of the Merger on operating results of the combined company, market position of the combined company and product portfolio of the combined company. These statements are not guarantees of future performance, involve certain risks, uncertainties and assumptions that are difficult to predict, and are based upon assumptions as to future events that may not prove accurate. Therefore, actual outcomes and results may differ materially from what is expressed herein. In any forward-looking statement in which Nanometrics expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement or expectation or belief will result or be achieved or accomplished. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: the risk that the Nanometrics and Accent businesses will not be integrated successfully; Nanometrics’ ability to achieve the cost savings and cash earnings expected, costs related to the Merger; failure of the Nanometrics shareholders to approve the Share Issuance, failure of the parties to satisfy various closing conditions, the inability of Nanometrics to achieve the market position anticipated and other economic, business, competitive and/or regulatory factors affecting Nanometrics’ and Accent’s businesses generally, including those set forth in Nanometrics’ filings with the SEC, including its Annual Report on Form 10-K for its most recent fiscal year, especially in the Management Discussion and Analysis section, its most recent Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. All forward-looking statements included in this communication are based on information available to Nanometrics on the date hereof. Nanometrics undertakes no obligation (and expressly disclaims any such obligation) to update forward-looking statements made in this communication to reflect events or circumstances after the date of this communication or to update reasons why actual results could differ from those anticipated in such forward-looking statements. |