Electro Scientific Industries (ESIO) 8-K ESI Announces Second Quarter Fiscal 2011 Results

Exhibit 99.1

Brian Smith

ESI

503-672-5760

smithb@esi.com

ESI Announces Second Quarter Fiscal 2011 Results

Orders Grow 139% Year Over Year and 10% Sequentially

PORTLAND, Ore. – October 28, 2010 –Electro Scientific Industries, Inc. (NASDAQ:ESIO), a leading supplier of innovative laser-based manufacturing solutions for the microtechnology industry, today announced results for its fiscal 2011 second quarter ended October 2, 2010. Financial measures are provided on both a GAAP and non-GAAP basis, which excludes the impact of purchase accounting, equity compensation and non-recurring items.

Revenue in the second quarter was $59.6 million, compared to $58.5 million in the first quarter of 2011 and $27.6 million in the same quarter one year ago. On a GAAP basis, net loss was $0.6 million or $0.02 per share, compared to net income of $0.2 million or $0.01 per diluted share in the prior quarter. On a non-GAAP basis, excluding the impact of purchase accounting, equity compensation and non-recurring items, second quarter net income was $2.9 million or $0.10 per diluted share, compared to net income of $0.8 million or $0.03 per diluted share in the first quarter.

“We saw excellent demand this quarter, with orders at $70 million. Solid revenue and improved gross margin yielded strong non-GAAP earnings,” stated Nick Konidaris, president and CEO of ESI. For the first half of fiscal 2011, sales were $118 million, up 135% from the first half of last fiscal year.

Orders for the second quarter were $70.2 million, compared to $64.1 million in the prior quarter and up 139% from $29.3 million in the prior year’s second quarter. Konidaris continued, “Our semiconductor and interconnect groups saw double-digit sequential order growth. We received orders from multiple customers in our DRAM repair business, including a large order from Hynix, and our flex circuit interconnect business had a record quarter.” Revenues increased 2% sequentially driven by strong orders and reduction of backlog in the interconnect and micromachining business.

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Second Quarter Fiscal 2011 Results

Gross margin for the quarter was 44%, the highest in over two years. Konidaris added, “We are pleased that our gross margins rebounded this quarter, on higher production levels and improved product mix.”

Income tax expense for the quarter was $1.5 million, more than offsetting income before taxes of $0.9 million. The higher tax expense results in a year-to-date tax rate of approximately 32%, and is due to the timing of income between quarters and an increase in the expected annual level of income.

During the quarter ESI acquired the assets of PyroPhotonics Lasers Inc., a manufacturer of tailored-pulse fiber lasers based in Montreal, Canada. Konidaris stated, “We are enthusiastic about tailored-pulse technology and its capability. Tailored-pulse technology has provided significant differentiated value in our market-leading DRAM repair tools. In addition, PyroPhotonics will allow us to enter and strengthen our position across multiple markets and applications, including solar.”

Balance Sheet and Cash Flow

At quarter end, cash and investments totaled $169.8 million. Cash used in operations was $1.9 million, reflecting higher inventory and receivables balances due to timing of shipments during the quarter.

Q3 2011 Outlook

Based on current business conditions, ESI expects revenues for the third quarter of fiscal 2011 in the mid-$60 million range. We expect the acquisition of PyroPhotonics will negatively impact earnings by two to three cents per share. As a result, non-GAAP earnings per share are expected to be $0.10 to $0.15 excluding the impact of purchase accounting, equity compensation and non-recurring items.

Konidaris concluded, “Our product portfolio and competitive position are strong. Our growth strategy is on track, as we work to expand our addressable market by introducing new breakthrough solutions in the semiconductor, LED, and advanced micromachining markets. I’m pleased with our progress toward building ESI into the established leader in the growing market of precision laser micromachining.”

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Second Quarter Fiscal 2011 Results

The company will hold a conference call today at 5:00 p.m. EDT. The session will include a review of the financial results, operational performance and business outlook, and also a question and answer period.

The conference call can be accessed by calling 888-419-5570 (domestic participants) or 617-896-9871 (international participants). The conference ID number is 94675422. A live audio webcast can be accessed atwww.esi.com. Upon completion of the call, an audio replay will be accessible through November 7, 2010, at 888-286-8010 (domestic participants) or 617-801-6888 (international participants), passcode 17525614. The webcast will be available on ESI’s website for one year.

Discussion of Non-GAAP Financial Measures

In this press release, we have presented financial measures which have not been determined in accordance with generally accepted accounting principles (GAAP) and are therefore non-GAAP financial measures. Non-GAAP financial measures exclude the impact of purchase accounting, equity compensation, restructuring costs, and non-recurring items. We believe that this presentation of non-GAAP financial measures allows investors to better assess the company’s operating performance by comparing it to prior periods on a more consistent basis. We have included a reconciliation of various non-GAAP financial measures to those measures reported in accordance with GAAP. Because our calculation of non-GAAP financial measures may differ from similar measures used by other companies, investors should be careful when comparing our non-GAAP financial measures to those of other companies.

About ESI

ESI is a leading supplier of innovative laser-based manufacturing solutions for the microtechnology industry. Our systems enable precise structuring and testing of micron to submicron features in semiconductors, electronic devices, LEDs and other high-value components. We partner with our customers to make breakthrough technologies possible in the semiconductor, microelectronics and other emerging industries. Founded in 1944, ESI is headquartered in Portland, Ore, with global operations from the Pacific Northwest to the Pacific Rim. More information is available atwww.esi.com.

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Second Quarter Fiscal 2011 Results

Forward-Looking Statements

This press release includes forward-looking statements about the markets we serve, revenue, cash flow, growth, new products and markets, and earnings per share. These forward-looking statements are based on information available to us on the date of this release and we assume no obligation to update these forward-looking statements for any reason. Actual results may differ materially from those in the forward-looking statements. Risks and uncertainties that may affect the forward-looking statements include: the risk that anticipated growth opportunities may be smaller than anticipated or may not be realized; risks related to the relative strength and volatility of the electronics industry - which is dependent on many factors including component prices, global economic strength and political stability, and overall demand for electronic devices (such as capacitors, semiconductor memory devices and advanced electronic packages) used in wireless telecommunications equipment, computers and consumer and automotive electronics; the health of the financial markets and availability of credit for end customers and related effect on the global economy; the volatility associated with the semiconductor industry which includes the relative level of capacity and demand, and financial strength of the manufacturers; the risk that customer orders may be canceled or delayed; the ability of the company to respond promptly to customer requirements; the risk that the company may not be able to ship products on the schedule required by customers, whether as a result of production delays, supply delays, or otherwise; the ability of the company to develop, manufacture and successfully deliver new products and enhancements; the risk that customer acceptance of new or customized products may be delayed; the risk that large orders and related revenues may not be repeated; the company’s need to continue investing in research and development; the company’s ability to hire and retain key employees; the company’s ability to create and sustain intellectual property protection around its products; risks related to the integration of the PyroPhotonics business; foreign currency fluctuations; the company’s ability to utilize recorded deferred tax assets; taxes, interest or penalties resulting from tax audits; changes in tax laws or the interpretation of such tax laws; and future liquidity and valuation of auction rate securities.

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141 | www.esi.com

ESI Announces Second Quarter Fiscal 2011 Results

Electro Scientific Industries, Inc.

Second Quarter Fiscal 2011 Results

(In thousands, except per share data)

(Unaudited)

	Fiscal quarter ended									Two fiscal quarters ended
Operating Results:	Oct 2, 2010			Jul 3, 2010			Sep 26, 2009			Oct 2, 2010			Sep 26, 2009
Net sales	$	59,554		$	58,471		$	27,638		$	118,025		$	50,241
Cost of sales		33,553			36,998			18,212			70,551			34,854
Gross profit		26,001			21,473			9,426			47,474			15,387
Operating expenses:
Selling, service and administration		15,046			12,845			11,355			27,891			23,326
Research, development and engineering		10,217			10,211			7,441			20,428			14,896
Merger termination proceeds, net		—			—			—			—			(4,516	)
Net operating expenses		25,263			23,056			18,796			48,319			33,706
Operating income (loss)		738			(1,583	)		(9,370	)		(845	)		(18,319	)
Non-operating income:
Interest and other income, net		187			58			357			245			699
Total non-operating income		187			58			357			245			699
Income (loss) before income taxes		925			(1,525	)		(9,013	)		(600	)		(17,620	)
Provision for (benefit from) income taxes		1,536			(1,726	)		(2,893	)		(190	)		(5,970	)
Net (loss) income	$	(611	)	$	201		$	(6,120	)	$	(410	)	$	(11,650	)
Net (loss) income per share - basic	$	(0.02	)	$	0.01		$	(0.22	)	$	(0.01	)	$	(0.43	)
Net (loss) income per share - diluted	$	(0.02	)	$	0.01		$	(0.22	)	$	(0.01	)	$	(0.43	)

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141

ESI Announces Second Quarter Fiscal 2011 Results

Electro Scientific Industries, Inc.

Second Quarter Fiscal 2011 Results

(Amounts in thousands)

(Unaudited)

Financial Position As Of:	Oct 2, 2010		Jul 3, 2010		Apr 3, 2010
Assets
Current assets:
Cash and cash equivalents	$	40,420	$	54,225	$	39,335
Restricted cash		10,769		10,824		10,824
Short-term investments		118,628		114,894		116,140
Total cash, restricted cash and investments		169,817		179,943		166,299
Trade receivables, net		46,388		33,482		38,061
Inventories		73,064		69,936		72,090
Shipped systems pending acceptance		6,285		3,412		4,106
Deferred income taxes, net		7,499		7,216		7,232
Other current assets		8,350		8,441		8,677
Total current assets		311,403		302,430		296,465
Non-current assets:
Auction rate securities		5,215		4,630		5,021
Property, plant and equipment, net		39,575		39,732		40,590
Non-current deferred income taxes, net		32,909		33,984		31,079
Goodwill		4,014		—		—
Acquired intangible assets, net		10,895		7,734		8,255
Other assets		13,340		11,200		13,008
Total assets	$	417,351	$	399,710	$	394,418
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	20,440	$	15,829	$	14,607
Accrued liabilities		22,683		18,554		14,937
Deferred revenue		16,373		10,591		13,193
Total current liabilities		59,496		44,974		42,737
Non-current income taxes payable		9,260		9,195		9,019
Shareholders’ equity:
Preferred and common stock		147,785		145,312		142,369
Retained earnings		199,076		199,687		199,486
Accumulated other comprehensive income		1,734		542		807
Total shareholders’ equity		348,595		345,541		342,662
Total liabilities and shareholders’ equity	$	417,351	$	399,710	$	394,418
End of period shares outstanding		28,072		27,901		27,665

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141

ESI Announces Second Quarter Fiscal 2011 Results

Electro Scientific Industries, Inc.

Analysis of Second Quarter Fiscal 2011 Results

(Dollars and shares in thousands)

(Unaudited)

	Fiscal quarter ended									Two fiscal quarters ended
	Oct 2, 2010			Jul 3, 2010			Sep 26, 2009			Oct 2, 2010			Sep 26, 2009
Sales detail:
Semiconductor Group	$	13,160		$	19,057		$	7,714		$	32,217		$	12,974
Components Group		13,304			18,803			6,098			32,107			11,248
Interconnect Micro-Machining Group		33,090			20,611			13,826			53,701			26,019
Total	$	59,554		$	58,471		$	27,638		$	118,025		$	50,241
Gross margin %		44	%		37	%		34	%		40	%		31	%
Selling, service and administration expense %		25	%		22	%		41	%		24	%		46	%
Research, development and engineering expense %		17	%		17	%		27	%		17	%		30	%
Operating income (loss) %		1	%		(3	%)		(34	%)		(1	%)		(36	%)
Effective tax rate %		166	%		113	%		32	%		32	%		34	%
Average shares outstanding - basic		28,010			27,791			27,356			27,901			27,295
Average shares outstanding - diluted		28,010			28,212			27,356			27,901			27,295
End of period employees		627			597			569			627			569

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141

ESI Announces Second Quarter Fiscal 2011 Results

Electro Scientific Industries, Inc.

Second Quarter Fiscal 2011 Results

(In thousands, except per share data)

(Unaudited)

Reconciliation of GAAP to Non-GAAP Financial Measures:

	Fiscal quarter ended									Two fiscal quarters ended
	Oct 2, 2010			Jul 3, 2010			Sep 26, 2009			Oct 2, 2010			Sep 26, 2009
Gross profit per GAAP	$	26,001		$	21,473		$	9,426		$	47,474		$	15,387
Add back:
Purchase accounting included in cost of sales		289			289			289			578			578
Equity compensation included in cost of sales		294			282			350			576			565
Total non-GAAP adjustments to gross profit		583			571			639			1,154			1,143
Non-GAAP gross profit	$	26,584		$	22,044		$	10,065		$	48,628		$	16,530
Non-GAAP gross margin		44.6	%		37.7	%		36.4	%		41.2	%		32.9	%
Operating expenses per GAAP	$	25,263		$	23,056		$	18,796		$	48,319		$	33,706
Less:
Purchase accounting included in operating expenses:
Selling, service and administration		139			189			198			328			641
Research, development and engineering		36			36			36			72			62
Subtotal-purchase accounting included in operating expenses		175			225			234			400			703
Equity compensation included in operating expenses:
Selling, service and administration		1,638			2,224			1,460			3,862			3,238
Research, development and engineering		399			377			337			776			651
Subtotal-equity compensation included in operating expenses		2,037			2,601			1,797			4,638			3,889
Acquisition costs (settlement proceeds) included in operating expenses:
Selling, service and administration		280			(889	)		—			(609	)		—
Subtotal-acquisition costs (settlement proceeds) included in operating expenses		280			(889	)		—			(609	)		—
Other non-recurring items included in operating expenses:
Merger termination proceeds, net		—			—			—			—			(4,516	)
Subtotal-other non-recurring items included in operating expenses		—			—			—			—			(4,516	)
Total non-GAAP adjustments to operating expenses		2,492			1,937			2,031			4,429			76
Non-GAAP operating expenses	$	22,771		$	21,119		$	16,765		$	43,890		$	33,630
Operating income (loss) per GAAP	$	738		$	(1,583	)	$	(9,370	)	$	(845	)	$	(18,319	)
Non-GAAP adjustments to gross profit		583			571			639			1,154			1,143
Non-GAAP adjustments to operating expenses		2,492			1,937			2,031			4,429			76
Non-GAAP operating income (loss)	$	3,813		$	925		$	(6,700	)	$	4,738		$	(17,100	)
Non-operating income, net per GAAP	$	187		$	58		$	357		$	245		$	699
Non-GAAP non-operating income	$	187		$	58		$	357		$	245		$	699
Net (loss) income per GAAP	$	(611	)	$	201		$	(6,120	)	$	(410	)	$	(11,650	)
Non-GAAP adjustments to gross profit		583			571			639			1,154			1,143
Non-GAAP adjustments to operating expenses		2,492			1,937			2,031			4,429			76
Income tax effect of non-GAAP adjustments		394			(1,941	)		(406	)		(1,547	)		377
Non-GAAP net income (loss)	$	2,858		$	768		$	(3,856	)	$	3,626		$	(10,054	)
Basic Non-GAAP net income (loss) per share	$	0.10		$	0.03		$	(0.14	)	$	0.13		$	(0.37	)
Diluted Non-GAAP net income (loss) per share	$	0.10		$	0.03		$	(0.14	)	$	0.13		$	(0.37	)

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141

ESI Announces Second Quarter Fiscal 2011 Results

Electro Scientific Industries, Inc.

Second Quarter Fiscal 2011 Results

(Amounts in thousands)

(Unaudited)

Consolidated Condensed Statements of Cash Flows:

	Fiscal quarter ended									Two fiscal quarters ended
	Oct 2, 2010			Jul 3, 2010			Sep 26, 2009			Oct 2, 2010			Sep 26, 2009
Net (loss) income	$	(611	)	$	201		$	(6,120	)	$	(410	)	$	(11,650	)
Non-cash adjustments and changes in operating activities		(1,266	)		14,568			4,942			13,302			9,561
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		(1,877	)		14,769			(1,178	)		12,892			(2,089	)
NET CASH USED IN INVESTING ACTIVITIES		(12,920	)		(198	)		(38,477	)		(13,118	)		(67,194	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		150			69			97			219			(116	)
Effect of exchange rate changes on cash		842			250			375			1,092			1,152
NET CHANGE IN CASH AND CASH EQUIVALENTS		(13,805	)		14,890			(39,183	)		1,085			(68,247	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		54,225			39,335			124,474			39,335			153,538
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	40,420		$	54,225		$	85,291		$	40,420		$	85,291

13900 NW Science Park Drive | Portland, Oregon 97229 | 503.641.4141