Thank you for standing by, and welcome to the ASML 2009, fourth quarter and annual results conference call on January 20, 2010. Throughout today’s introduction, all participants will be in a listen-only mode, and after ASML's introduction there will be an opportunity to ask questions. (Operator instructions). I would now like to turn the call over to Mr. Craig DeYoung. Please go ahead sir.

Thank you, operator. And good afternoon and good morning, ladies and gentlemen. This Craig DeYoung, Vice President of Investor relations and Corporate Communications at ASML. I'd like to welcome you to our investor call and webcast. As the operator mentioned, the subject of today's call is ASML's 2009 fourth quarter and annual results. Co-hosting today's call from our headquarters in Veldhoven, the Netherlands are Mr. Eric Meurice, ASML's CEO and Mr. Peter Wennink, ASML's CFO. At this time, I’d like to draw your attention to the Safe Harbor Statement contained in today's press release and in our fourth quarter results presentation, both of which you may find on our website at www.asml.com. This Safe Harbor Statement will apply to this call as well as all associated presentation materials. Let me remind you, advise you that the length of this call will be 60 minutes. Now, I'd like to turn the call over to Mr. Meurice, for a brief introduction. Eric?

Thank you, Craig. Good afternoon and good morning, thank you for attending our Q4, 2009 results conference call. Peter and I would like to provide an overview and some comments around the quarter. And as usual Peter will start with a review of the Q4 financial performance, with added comment on the short term outlook. I will complete the introduction with some further details on our current situation, as we close out 2009 and head into 2010. Following the introduction, we will open up for questions. So Peter, please?

Thank you, Eric. As Eric mentioned, I would like to take a moment to share some observations on the events of the last quarter, as well as some details on our fourth quarter results. We will start with that. Our fourth quarter sales were EUR 581 million, this was slightly higher than our sales guidance for the quarter. We shipped a total of 25 systems, 19 of which were new. New system ASP was EUR 19.7 million versus EUR 22.4 million in the third quarter, which indicates a substantial blend of immersion and non-immersion tools, we shipped 11 immersion tools and 14 non-immersion tools, reflecting an increased demand from our foundry customers for capacity related tools. The average selling price of new and used systems combined was EUR 17.3 million and was therefore also lower than in the third quarter. Our service and field option sales were high at close to EUR 150 million, this was primarily driven by productivity upgrades. Such upgrades are not unusual as customers look for incremental capacity when a rise in their product demand suddenly becomes evident. And the company fourth quarter gross margin was 38% versus 34.4% in the third quarter. This reflects an improved coverage of our fixed manufacturing cost, cost reductions and stronger service and field option sales, latter generally carrying higher gross margins We continued our focus on R&D with a spend of 150 million in the fourth quarter, which was by the way the same as our spend in Q3. And SG&A came in at 37 million which is about the same as what we had in Q3. As a result of the aforementioned, operating income improved from 7% in the third quarter to around 12% in Q4. And last quarter of the year, we generated EUR 19 million in net cash. With that, we were able to close our 2009 with a cash balance comfortably over EUR 1 billion. Q4 net bookings were strong at 40 systems, valued at EUR 956 million, net immersion bookings were at 25 systems, 23 were new and 2 were used, and that this demonstrates a continued focus on technology investments driven again by the DRAM and foundry market segments with fresh investments just beginning to emerge. In addition we sold 12 new KrF bookings, indicating a continued need for more non-critical systems and support of the leading edge production ramp of our foundry customers. Fourth quarter bookings pushed our backlog to EUR 1.85 billion containing 69 systems at DRAM that being the highest level of the backlog in 10 quarters. We are highlighting is the fact that there are 51 immersion systems in our backlog, 17 of which are our newest immersion product the NXT:1950. As for the outlook, we continue to increase factory production capacity in order to meet the growing demand, as indicated by our fourth quarter and the anticipated first quarter bookings. However, due to the fact that the normal production lead time for our more complex and new leading edge products is still fairly low, we will not be able to completely satisfy all demand in the desired delivery time. As a result some first quarter delivery requests will be shipped early Q2, but now our ramp up capability would have accelerated. And as a result, we expect the first quarter sales to be about EUR 700 million, with the second quarter coming in around to EUR 950 million. Gross margin in the first quarter is expected to be about 40%, R&D expenses are expected to be EUR 120 million and SG&A 40 million. Furthermore, we expect orders in the first quarter to be at approximately the same level as the fourth quarter of 2009, mainly driven by memory customer and foundry customers again. And finally in respect of 2009, ASML will submit the proposal to the 2010 general meeting of shareholders to declare an unchanged dividend of $0.20 per share. And now I'd like to turn the call to Eric who will give us some more views on the upcoming quarters.

Thank you, Peter. So we closed the year as planned with recovering sales and the strong Q4 systems booking of EUR 956 million, confirming the semi-conductor segment up turn. This up turn is currently mainly driven by technology buys from the DRAM sector, by a fairly modest technology set of buys from flash sector, and capacity buys by the first tier foundry at 40 and 45 nanometer node. We believe that we will see a continued high level of bookings for the beginning of the year. A certain numbers of engines of growth are contributing to this. First the build up of 40 nanometer DRAM capacity will continue well into their H2 2010 as the second batch of DRAM players will start ramping then. Second, the long awaited 30 nanometer flash RAM and 20 nanometer development flash will also start contributing more heavily in Q3, 2010. Third, we expect structural foundry build in H2 including the first tier, but also the second tier customers. With our current 2010 shipment run rate, we have calculated that the leasehold installed base will support semiconductor unit capacity increase of only 12% in 2010 versus 2009. Upside to this semiconductor unit gross number, as discussed by most industry analyst at this very time could justify improved lithography shipment run rates during the year. In other terms, the structural capacity catch up that we are seeing today, the technology base and the potential capacity gap to demand growth support at minimum and the current litho shipment run rate, while certainly not contributing any surplus capacity. With this demand ramp as a background, we are continuing to focus our product development -- on product development and new product introductions. We have now converted all our mid range TWINSCANs to an upgraded platform with a higher throughput, better overlay and better CD uniformity. We are also ramping our new NXT platform, with state of the art performance. We are deploying our holistic lithography product suite and we continue development of the EUV technology. Regarding the NXT, our new platform, we now have installed base of five systems and a backlog of 17 systems, 11 in the memory sector, 5 in the IDM sector and one in the foundry sector. Customers will be ramping up these machinery NXTs into volume production in Q2 2010. Our holistic lithography product suite including the customer accepted software solutions, producing higher process yields is being further enhanced by FlexRay, our flexible illumination system and our YieldStar standalone and inline metrology systems. These hardware when married with software of the suite provides even better scanner performance and greater factory process control. Regarding EUV technology, we are making good system integration progress that along with continued source performance development allows us to confirm our ability to ship the first pre-production systems in the second half of 2010, systems for which we plan to close the fix order very soon. We believe that the renewed industry interest for product and technology transitions that we are seeing today, in conjunction with ASML's stronger position mainly due to improved cost structure, but also differentiated and diverse products has positioned ASML very well for its next significant growth opportunity. So, on this summary, I would like to leave it to you to ask Peter and I questions.

Thanks, Eric. Ladies and gentlemen, the operator will instruct you momentarily on the protocol for the Q&A session, but before hand, I'd like to ask you to kindly limit your question to one, one question with one short follow-up if necessary and if possible, this will allow us to get as many callers in as we can. Operator, can we have your instructions and then the first question please.

Of course, thank you, sir. Ladies and Gentlemen at this time, we will begin the question and answer session. (Operator instructions). Gentlemen, today's first question is from Mr. Didier Scemama - RBS

Good afternoon, it's RBS, thanks for taking my question. I'd just like to ask a question on the flash memory market and more specifically on SSDs just like to have your opinion on basically the impacts of that technology on your revenues. If I’m correct the adoption of SSDs is quiet modest at this point for Netbooks and Notebooks probably in the low single digit levels, so what I’m wondering is, if SSD's adoption in Notebooks and Netbooks were to reach something like 10%, what would be the impact in your view on demand for lithography equipment and related to that what sort of technology would be required when you talk to your customers to get to the sort of break -- sort of inflection point on pricing to re-drive adoption of SSDs?

Very good question, because SSD is a very large driver, clearly there has been a bit of a disappoint in some ways as SSD has remained in the areas of I would say 3, 4, 5% mount rate in the PC world, to get to about 10% you would have to have about 1 billion to 1.5 billion of lithography equipment. The customers I think have started to indicate to us that the mount rate is probably going to increase due to two things. One, they are improving the drivers, the software drivers, which I think is more or less related to Windows 7. I understand that it is not yet perfect but I understand it's improving and therefore will increase the speed of adoption. In addition, it is true that there is a sort of a new agreement that SSD cost target will be so much more supported by 20 nanometer, which is the current development being put in place by the first year. So in other terms, SSD didn’t really contribute anything at this moment into billings and into bookings, and we expect this to be one of the upside opportunities of the second half of 2010 and into -- significantly into 2011 and '12.

Great, and in your view, when Google announced that you know their Chrome operating system would be only supported by SSDs, I mean do you think that could kick start the market or do you think that it’s a bit further out?

No, it is certainly another obvious position that says the world will probably get beyond 10%. I think that’s a message that the whole industry is expecting. The key question is an economic question, really is exactly when do you have an inflection point and an acceleration point, and to that I'm not a specialist of the industry so I cannot really answer to you. But clearly, we expect to beyond 10% and we look forward to say 2% to 3% market share, 2% to 3% mount rate on that correspond to about 1 billion of lithography. So we feel this is a significant driver of the business and we feel good that it will last next five years or so.

The next question is from Mr. Gareth Jenkins. Please state your company name followed by your question.

Yeah, thanks this is Gareth Jenkins from UBS. Just a quick one on service revenues, very strong in Q4 and I just wondered what the sustainability of this is and obviously related to that, whether the outlook for gross margins beyond Q1 given the service sales? Thank you.

Yeah, the service sales in Q4 were particularly strong, which is not uncommon like I said also in the opening comments. When customers have underestimated the capacity ramp there, they are looking for upgrades, which they have not done in downturns and especially productivity upgrades are done very popular which we can do relatively quickly. So, in the first quarter just to take away some of the output pressure, this is a very popular product, which actually brought the revenues to about 150 million. Those revenues throughout the year, the first three quarters were less than 100. Normally the normal run rate would be anywhere between also -- between 90 and 150 million, so around 110, 115, 120, 125 million, it would be a normal run rate.

Thanks. Just to follow-up on that, gross margin outlook post Q1, you had very solid gross margins in Q1. I just wonder if you could give us a sense on how we trend through the year. Thanks.

Well, we talked about it also on previous calls, the gross margin is a function of , of course, our ability to cover our fixed cost. So the order intake that we saw in the fourth quarter, we guided for the first quarter is a good indicator that fixed cost coverage will probably be our major issue going forward; as a matter, of fact it will contribute to the gross margin. Also the cost reduction that are coming through, which were a result of the cost programs that we had last year will come through, so the guidance that we gave you 40% on 700 million clearly gives you upside when we move to 950. How much that will be, we will be more specific at the end of Q1, but clearly the movement is in the right direction and the main drivers I just mentioned.

Next question is from Mr. Gunnar Plagge. Please state your company name followed by your question.

Hello, it's Nomura, and could you talk a little bit about the market in Japan? I mean it looks as if the last three quarters you haven’t hadn’t a lot of orders, almost no orders. Revenues last four quarters were also basically zero. Then you still have 230 million of backlog which I think is mainly Toshiba. So maybe first, with regard to Toshiba and are we expecting a shipment here soon and could you maybe also qualify and whether this is likely XT or NXT? And then with regard to Elpida an update would also be very helpful. Thank you.

You know it is impossible for us to be specific on customers, we will try to brush an answer that makes sense for you and your modeling. Yes, Japan is clearly at this moment DRAM vendor, a Flash vendor and a very, very, very small market. For the rest as you know the business of logic is not booming at all at this moment in Japan. So, in the DRAM sector, there is a definitely a split business between Japan and Taiwan in terms of Elpida, and we are happy, as you know to have won their confidence, I think that is public. And as you know they have announced themselves that they are ramping their production as of Q1. So this production is going to be split between Taiwan and Japan. The Flash environment in general as we said has been I would not say disappointed, but small, and this is because it is true that the whole industry have built up significant over capacity which took 2009 to be digested and it is highly possible that Toshiba -- in fact, it is clearly the case of Toshiba. So, we have also said that the flash business is going to come back. It was a revenge driven by the applications we talked about, plus additional needs in mobile phones and additional needs in servers, and this is starting to built up momentum as of Q2, and that will increase our business in Japan.

Generally, I would like to add to that that looking at these regional sales with the importance of global, let’s say global, I would say alliances especially in the memory world, where technology choices are actually made but could be executed in different countries than what I would call the real originating technology could have come from country A and could be then made in country B. So, you have to be careful with just looking at the regional split, because those designs could actually be made in these let's say joint corporation structures in other places of the world and that’s definitely the case in for the regional that you just mentioned.

And then on the supply constraints. It seems that you are now at about 1100 flexible labor. I think you were at 1,700 in 2008. So, my question really is the supply bottleneck, is that more within ASML or is it more within the supply chain?

No, it is definitively the supply chain although we thank our suppliers for their effort because in reality the constraint is because we have converted all our products to the new products. The mid-range used to be called the XT3 versions, this is internal code. It is now an XT4 version, the new machine called NXT. So you're talking about having to rebuild from scratch, from zero a complete supply chain which usually would take between one year or nine months at least to be setup inclusive their own CapEx et cetera, et cetera. So this is the main constraint. Our business is one of integration where testing is more important and, yes, it is easier for us to build up temporary workers or using some of our engineers to do more. So we definitively are far from being the limits, the limit is because we are moving up all those new products and it takes time to build up the pipeline.

The next question is from Mr. Satya Kumar, please state your company name followed by your…

Hi, Satya Kumar from Credit Suisse, quick question on your orders from memory. I presume obviously most of these orders are coming from DRAM. How much of these orders are from technology shrinks versus capacity and at this point, do you have a sense of what portion of the installed base in DRAM has already placed orders to shrink that's in your backlog in Q4.

First question is easier to answer, in DRAM bookings that we got, 100% is technology transition. In fact this is one of the things we have discovered. It seems that now the customers have this capability of using all the installed base in the, what we call the non-critical layers of the new technology and therefore the only thing they need is the critical layers and that’s why they only buy the latest machine which obviously immersion. So in DRAM clearly 100% is an immersion deal, critical layers and non critical are basically installed base. Regarding percentages of what remains to be booked by the guys who have already started, I would say we are at 50% of the first tier and we are low on the second tier.

If I look at, I mean continuation on the DRAM theme again, if I look at your 2009 shipments to memory in aggregate that was less than a fourth of your shipments to the sector in 2007 peak year. Obviously DRAM supply growth was constrained and clearly you were guiding below consensus for Q1, one of your customers, Nanya, this morning actually lowered supply growth projections for 2010 because of the lack of equipment availability, supposing we get another 40% or 50% demand growth for DRAM in 2011, would we need to start to see capacity orders from DRAM to meet that demand, because you are sort of using up all the shrink spent this year?

In fact, first of all, it's very difficult to explain why would a supply customer will be reducing or increasing its output, it's may be because it’s litho driven but it maybe because there is other reasons for that but clearly at this moment everybody is trying to ramp as fast as possible. In my opinion, I think the biggest issue that they will have is that they also have to ramp new technologies and processes is not only CapEx, its, we do not know about the yield, we do not know about the complexity of making it work, so you are going to have for a period of 6 to 9 months tons of difficulties in this segment of ramping to demand. So that in turn will create potential need for additional bookings because some of the guys who will have more difficulty to hit the customers needs, the customers will go for the competitors. So you are going to potentially have in fact an acceleration of bookings on some areas to try to win the places where they cannot deliver. Our own constraints is, yes, we are indeed putting constraints on our customer at this moment because you start from scratch and at the moment in this industry where the customers come and say I need to have delivery in three months and we all know the theoretical returns ’09, so there is obviously some haggling about who is right/wrong, et cetera, and the terms we are creating some constraint. But at this moment I would not consider these constraints are life threatening to anybody nor stopping you to buy any nice end products.

Sorry I guess my question was in 2011, I understand that 2010 technology shrink part of it, but in 2011 if you again get demand growth?

Yes, sorry, I missed it. The node today in DRAM is 40 nano and in 2011 there is going to be another node; in fact, we are at this moment reviewing the requirements for the new nodes and it seems that the DRAM industry is putting itself on a one year type lead-time for new nodes from a original 18 months. So, there is something at this moment which is happening for 2011 a new sector of technology.

It is not clear whether that the shrink will basically satisfy the bit growth demand in 2011. If that is not the case, we need new fabs and that’s what you were looking for and that’s unclear right now, that really depends on the bit growth numbers that we should try to find out how much that could be for 2011. Now those numbers have been going up, the industry analysts have over the last 2-3 months have actually upped their forecast for bit growth and we are, currently trying to figure out what that would mean in terms of real additional capacity in terms of new fabs, where that’s not clear.

The next question is from Mr. Sandeep Deshpande. Please state your company name followed by your question.

I just had a question on the competitive position of the NXT, versus Nikon mainly because of the lot of noise in the market associated with some customers trying out the new Nikon tool et cetera. How you see your positioning in terms of what you shipped as well as what you have in terms of order from the major customers and I have one follow-up.

So, definitely our competitor is very valid competitor working on value generation so our competition is clearly on the capabilities, on the performance of the machine. At this moment, most of us are running our machines, our software NXT and Nikon the 620 to try to meet their customer's requirements. We think that with five installed base and a backlog of 17 with certain numbers of committed production, we have proven to the customer that we've reached a level of performance that fits the needs. We understand that our competitor will continue improving and improving and improving their machine, this look very, very similar to us to the competition that started two years ago under their 610 and our XT, at the time we were fighting or targeting the same specification, today is about the same situation, the specification is basically the customer specification, so we have to try to make it. It will have to be proven who can make it which are the products which are at the end of the day have more extendibility, more capability and better cost of ownership. We feel comfortable about that, that race because we are still using a TWINSCAN concept, which allows machine to be measuring its wafers while it's exposing, which allows in fact you to decide how much you want to measure, which allows you to decide to in fact obtain an extremely good performance of chip resolution. Our competitor is using still a serial method by which you measure and then you expose. By doing this it is logical to understand that if you measure a lot to achieve very good exposure performance, then it takes time and then the lens waits until you can expose. So it has a lower throughput and potentially higher cost of ownership. So, we are comfortable that our concept is still different than our competitors and allow us to think that what we achieved when we introduced TWINSCAN in 2000 will be projected in the next decade, because we are still using differentiated architecture.

Thanks, Eric. Just one question, Peter, on the margin, I mean in the previous calls you’ve talked about I mean hitting, going towards the 30% margin at the peak. How should we be looking at gross margin then I mean given 950 million in order in take approximately in the fourth quarter, by the fourth quarter of this year, I mean possibly you could have revenues north of a 1.05 billion or so. So I mean if you did your numbers sitting today I mean what would be we be looking at gross margins at that sort of revenue level?

Well, I think clearly you understand, I am not going to give you any guidance on the fourth quarter gross margins. But to give you an indication, we said drivers for the gross margin development were adjustments in the cost structure, has a better product mix and especially focused on those products that will enhance the value of our tools, i.e. the holistic litho products which we are making progress with also in terms of shipments and ordering. That will find its way partially through let's say a field service and sales, but also in the value that we can contribute to the tool. Those are the elements next to the higher volume which will give us a better load [ph] of the fixed cost of which we said also last year that our target is to go if we start moving towards our focus on 5 billion, that we won’t have our target of 45% gross margin. Now clearly we're not going to be there from one quarter to the others going to be a trajectory, that’s going to take a bit of time, but when you talk about sales levels, you just indicated clearly the gross margin will be definitely significantly over 40%. It would be heading towards our target, whether we would be there in the fourth quarter is too early to say, but that’s definitely what our target is and we should be heading in that right direction. What that would mean for the operating margin, you were referring to, clearly we said also in the previous calls that that could be heading towards the 30% mark and that is easy if you take let’s say the 5 billion at 45%, then you subtract our R&D cost and our SG&A cost you can make that calculation easily. So clearly the gross margin and the operating margin trajectory is quite clear to us and the higher levels of sales to a level that you just mentioned will definitely help.

The next question is from Mr. Tim Arcuri. Please state your company name followed by your question.

Citigroup, thanks. Two things, first of all, if I take your June quarter shipment which you're actually guiding to and I assume that litho is going to be roughly 25% of wafer fab equipment which is up fairly sizably versus what it's been the last couple of years. So I'm sort of building in some share gain there for litho, it implies that the industry is going to spend about 50 billion, so that’s sort of at a 50 billion CapEx run rate, which is odd because all the companies, if you add up where all the companies are sort of guiding CapEx to, it’s more like 35 or 37 billion. So I'm kind of wondering, is it that people are forward buying lithography or is it that the companies just aren’t sort of coming clean with how much money that they are going to spend this year? And then I had a follow up next.

Well, definitely, I think historically, litho have been forward bought because the lead time is enormous on our side and secondly it takes also a very significant time to qualify your litho tools, so the wafers out takes a long time, so yes, it is a timing issue. Secondly, we cannot really comment on your 25% share of litho to the total CapEx in particular, on the quarter. You are now talking about an environment where the customers have been able to only buy equipments which help them on the critical layers and using their install base for non critical, even for litho, it’s kind of new. We used to have a more balanced situation by which a customer would come and say, I've got the new fab. To make the fab work, I need three -- I think the normal line would be 3 or 4 immersion, 5 to 10 KrF and 5 to 10 i-line, and we would take an order for that, that was the original way of doing business about 2 to 3 years ago. We haven’t done that for 2 to 3 years, we are only shipping the leading-edge. So it may be that you ratios have to be re-filled completely in view of this new model. I can’t really help you on this one because you are now, having talked to Applied Materials, KLA, et cetera, but for us we are certain that the guidance that we've given correspond to spots in those fabs and if we were not to ship, the customers will definitely not be able to build even the same amount of wafers of the new products than they even had in 2009 which would be impossible. So in other terms, you can question whether the run rate will last more than four quarters, but you cannot question that the run rate will not last for two quarters. Secondly I think you should look at another ratio if you wanted to do microeconomic ratio, you should take the diffusion rate, litho CapEx divided by sales of semiconductors. You will see an interesting curve, you will see that the curve was hovering around 3% for a long time and then it went up in 2007 when the DRAM business got crazy and it went from 3% to say 3.2-3.3 and then since 2007, that ratio is down. Last year it was 1.5% and this year it may be less than two or 2% if some of the analyst are correct. So you are talking about significant number, yes 950 million in the quarter, but if you divide this by the total expectation of silicon revenue, you are going to be surprised that we are much lower than historical curves.

Okay, I guess the gap is just so significant that it just sort of indicates that maybe there is going to be a fall off in bookings later on this year, but as a follow up, it seems like the weaker shipments in March came out of nowhere a bit and I am little surprised because if it’s related to the technology platform, it seems like you would have known about that before, so I am sort of wondering whether there was something that occurred between your meetings with folks during the quarter and now that sort of came out of nowhere that led your -- you to be more shipment constrained in March.

Yes and no, the discussion is for the fourth quarter where customers have been, do you want XTs or do you want NXTs? When you usually come up with this question, the customers always want NXTs and of course then you get yourself into a mode and say well an NXT has a nine-months lead time and XT has a six months lead time. And then you have to compromise this because of course the customer want an NXT because it has supposedly a longer lead time -- a longer lifetime with more extendabilities . So the customer is ready to pay more money, et cetera. So you have got that debate and to be honest it last until the last moment usually, in particular because they are excited about the NXT, so they want to wait until the last moment to switch between XTs and NXTs. So, what’s happened if you will is that we were expecting or we could have expected some customers to be more I would say realistic and ask for XT shipment in the Q1 timeframe, but in reality we could not deliver the NXT, but they basically agreed that they had to accept that -- ascertain if NXTs would not ship in March, but would ship in April. So, now remember an NXT costs 40 million so you can imagine how many NXTs it makes to have this slight change of expectations Q1 to Q2. So, that’s basically what happened. I think it is nothing special regarding the trends of business, it is just a timing plus or minus one months on four or five machines.

The next question is from Mr. Simon Schäfer. Please state your company name followed by your question. Simon Schäfer: It’s Goldman Sachs, I wanted to revisit your theme about being able to support 12% unit growth in the broader industry and maybe ask a question that was sort of asked before, what sort of DRAM bit gross do you think your install base can support today? In other words, how much of an incremental upgrade path do you think people really need to get to some sort of bit growth target that is inline with the historical average, if you look at DRAM bit growth coming out of a downturn historically?

So we think that our 12% DRAM if I am not mistaken corresponds to about 48% bit growth in DRAM, yes, that's about it, and in there you have also NAND which corresponds to 69% bit growth. So when you talk about now the excitement about Windows 7 you will hear some analyst talk about more than that now and I am trying to find out the latest analysis, in fact I don’t have it with me. So, you may have to ask them, but there is now more interest or more excitement about those numbers. Simon Schäfer: My follow up question would be, there seems to be some sort of discussion about when or if, your own order book perhaps maybe peaking at around a EUR 1 billion or so, but I was just wondering in your view given that capacity ads as you just discussed in DRAM at this point is still relatively low, same it seems to be the case in foundry and then NAND if anything is still relatively dormant, so I was just wondering what that means from your point of view in terms of the potential order peak then the cycle because historically speaking of course your quarterly order peak was not too far from current levels? Thank you.

Well, this is in fact why today for the first time, in fact for me for five years, we have guided six months and we are also guiding the possibility of upside. So that’s a way for us to say we believe that there is enough engines of opportunities of growth and what you mentioned about flash not being there already but should be there, DRAM bit growth is not that big at this moment et cetera, et cetera. As much opportunities to sustain this type of run rate that we're talking about. So, let me try to summarize it differently. If you and it's not us to answer it, it’s an economist to answer. If you believe that we are back into a rebuild up of a normal semiconductor cycle, so you look at your curve with semiconductor and we are down now and wherever you are, you are putting yourself back into an historical curve. If you do that, clearly we're talking about a sustained growth profile for 2010, 2011, 2012 and I do not know if we are going to hover plus or minus the billion or whatever, but you are talking about a very healthy opportunity which is why we have continued talking about our corporate target to reach 5 billion in fact during this next cycle. . Of course, if an analyst would tell you, no, this cycle will in fact be impeded by a sort of W curve or some sort, that is the world is going to have a hiccup due to unemployment et cetera, and all the good news, all these engines we talked about, the fact that there is tons of applications coming about, the fact that there has been under investment for longtime in some segments like the foundry segment, the fact that as Jim Arcuri was, like we were discussing, surprisingly people are buying only the leading edge, they are not buying anything else, that that has to change, the fact that there hasn’t been any fab lately but you are starting to see global foundry et cetera, et cetera. So all those good news are going to be impacted by an economic W curve then you would have a slightly less aggressive or you won't have the sustainable 1 billion thing but you probably won't be very far.

And also what I'd like to add to that, if you make a comparison to previous cycles is the one what Eric just said in this particular cycle. So lot of emphasis on the leading edge products in which our market share currently is significantly higher than it was in the previous two-three cycles that at least I have seen. So, I think there are couple of things that are definitely different here.

Next question is from Mr. Philip Scholte, please state your company name followed by your question.

Yes good afternoon Philip Scholte at Rabo Securities. A question on your potential resumption of share buybacks. I'm seeing some things on the newswires passing by. Could you maybe update us on this call where as to when you will decide on restarting share buybacks?

Yeah, what was said is quite clear that we will have a good year. We'll be profitable, we'll be generating cash, but it could be that in a year like 2010, we see I've indicated from Q1 to Q2, we see a growing sales trend which will, the way we run our business mean that the investments in working capital like in receivables and in inventory will clearly precede the generation of the cash. So it means that you first have to collect it in the end before you can distribute. So that was the only comment that was made, if you think about cash generation that will be good, but you have to keep in mind that there is a cash conversion cycle which first has to go through working capital and to receivables in a let's say year where you could see growing sales. So that would limit lets says the cash generation this year, but would definitely show in 2011. That was the only comment I made.

Right and the comment on the 1.5 billion cash position, is that correct or is it…

We always said we have a policy which is we target our cash balance anyway between EUR 1 or EUR 1.5 billion. So we don’t want to go lower then one, and we don’t necessarily to be higher than 1.5. So that’s no change. And that means if it will go higher, we will return the money to the shareholder and which will be a combination of dividend which we announced also today and of share buybacks.

Right, the short fall of what maybe on operating cost I was a bit surprised by the well sort of a ramp-up in R&D and SG&A. Can you already comment a bit on your expectations for the second quarters in those costs? Can we then expect them to continue to go up?

They will. Basically, what we are currently seeing, it will be at approximately the same level. That’s Q1.

We certainly decided to put more money into R&D. As you've noticed, this was a definite voluntary move. We can afford it and we have some ideas so we are going to use it.

Yeah, and the SG&A was mainly driven by selling related costs because selling costs are going up and also a bit of inflation of the existing workforce. So there were some modest salary increases but that’s also part of that.

The next question is from Mr. Jonathan Crossfield, please state your company name followed by your question.

Hi, it's BofA Merrill Lynch. I just had a question on pricing. I wondered if there was any pressure on pricing resulting from the constraints you're seeing with the customers or whether there is a pricing you're seeing on the NXT machine was effected in Q4 by the sale of the two valuation systems.

Well, in this business, pricing is mainly a very long term negotiation, often the customer who would chose you, he chooses you for a long time. So your price based on the technical performance and that has happened so there is no tactical pricing where we would try to increase the price for one quarter or reduce it depending on availability or pressure. So, no, we are on the same trend of pricing that we talked about which basically is targeted at offering the customer the standard cost of ownership improvement per year. We're doing this at this moment and that should allow us to move our gross margin as we said inclusive of the volume effect and every other volume north of 40% as we go.

And then just as a follow-up, with the capacity spending coming through from the tier 1 foundries, what’s your sense of how much farther they can go before they need new shelves or is there a risk that we see a pause in that capacity spending when they have to build more capacity?

Well, you have now, I would say officially positioned by global foundry that they are going to at least one, if not two, which kind of alludes -- it is my understanding that TSMC has also published their new shells, decisions I think, it’s a bit complicated to understand because they use the same numbering, if I’m not mistaken 512 or 514 or whatever it is. But these are new shells discussion or decisions. I’m not aware of any activities at UMC obviously but these are two very large members of the foundry community which are going to put shells in business.

The next question is from Mr. Mehdi Hosseini. Please state your company name followed by your question.

Thank you, it's Mehdi Hosseini from FBR Capital Markets. Two questions, first; if you were not constrained with manufacturing, what would be -- what would have been your Q1 guidance?

I don’t know if I will be put in jail if I want to answer your question, but I would think the demand, the customer would have been happier with 1.2 billion something, but be cautious with my number, life is always a comparison between dreams and reality, and we are always constraining the business because our lead times are so enormous. So if you ask me more the question, what is the natural need that does not constrain the real output, I think we are not far, of course you are pissed off without work, one months down there, because we take conflict out of the equation. But, at this point, I repeat your sons and grandsons will have their products in time.

Sure. And I look at the past quarter, past few quarters like Q4. The actual reported booking came in about 23% above your guidance. I wanted to know what happened that caused this upside compared to what you provided and could we see the same trend in Q1 primarily because of the increase in the lead time. Why wouldn’t memory or especially DRAM guys wanting to get into queue to secure shipment later this year?

Yeah, I think on the guidance we gave you our best estimate at that moment, three months is almost like feels like a century from time to time in this business, so its very difficult to -- let me go back to Q3, and in July and early August, we saw no trends of any booking activity really and just we came back from the holiday period and it was all fire. So these things happened fast, it's difficult to predict. We base our estimates on our current contacts with our customers but now as we speak there are days when we have an estimate and emails from top executives of our customers comes in and they are changing the demand. These things change and it could be a few tools, it could be like I said, 42 million, 40 million tools, you know if they want 4 extra, it's 150 million, so it's that level of granularity that has an impact, so that’s basically what it is. And on what could happen going forward I would like to refer what Eric said earlier, you know there are clearly when we look at the three sectors in our business DRAM, Flash and Foundry or Logic, it was quiet clear about where we are and that we feel there is an upside potential and that upside potential was somewhere down the line, we will translate into orders. What will happen is difficult to say.

And at this moment there is overheating in the order books, overheating in the sense that you mentioned it which is I am a customer, and I am getting worried about not having enough capacities, so I am overbooking or booking ahead, that hasn’t happen. And we are working very hard that it doesn’t happen and the fact that most of our capacity constraint at this moment is due to an introduction of new product but not the capacity constraint per se.

It’s a learning curve.

It’s a learning curve, so you get to know it because of the delay but you don’t get to know it because you are just not getting it. In fact all our customers are going to get the product and we are not intending to be limiters at all.

Sure, I am just trying to understand the longevity of this cycle. In one hand, the memory guys DRAM, Flash have all placed orders for only shrink or technology, they have yet to comeback for capacity. On the other hand as one of the callers have suggested maybe orders have peaked, but it seems like a conflicting thought process. So if the memory guys have yet to comeback with the real capacity orders and given the increase in lead time, how should we think about the timing of those, is that just the Samsungs of the world are waiting to have more confidence on the world economy and PC unit shipment or something else?

Well, we have unfortunately by good performance I suppose convinced our key customers that they can come up with very short term reaction. So, I do expect in fact when they will have a need for capacity which could happen with the example of a foundry guy who is today focusing on 45 nanometer but can get capacity order on 65 that will be on very, very short term lead time. So you will not have a preparation of that, it will happen, and we are going to have to be ready for these things.

Yeah, and then just also one comment, I mean just over 70% of the backlog is for shipments of the next 6 months, so if you would see a real over heating that would be a different number. So customers still have what they accept [ph] confidence that we will be able to ramp up and we have ample capacity in Q3 and in Q4 and we believe the same. So they don’t need to rush order and double book which by the way for those very expensive tools we have pretty good intelligence also at the customer side on where those tools are going. So we have also some reasons and we've some good sources to check whether this is true or whether it's just fantasy.

Ladies and gentlemen, I think we have about time for one more caller, so if you're unable to get through and you still have a question feel free to call the investor relations department we'll try to help you. And now operator, if we could have the last question or caller please.

Today's last question is from Mr. Janardan Menon. Go ahead please, sir, please state your company name followed by your question.

Yeah, it's Liberum Capital. Just a question, just following up on the previous set of questions which is by when would you expect to get the lead time on the 1950 down to around 6-7 months or rather by when would a customer feel that delivery of this tool is not a sort of bottleneck for his capacity RAM. An associate question is, when you first came out with the 1950, the assumption was that your early customers will be from the NAND Flash market and but now it looks like DRAM industry has gone ahead in NAND Flash and placed a lot of orders for this tool. So why do you think the NAND Flash industry is actually holding back on placing orders for this tool and do you think that the IDM industries especially microprocessor will also adopt this tool in a fairly wide way?

Yes, yes, and yes. So in terms of the lead time for the NXT, it, I would say it is now normal, but normal means six months and therefore we expect Q3 to be the time where we are taking as many orders as the customers are ready to give us. So we -- the difficulties, I don't say are fully past because we - but remember that machines takes a long time to be tested, so most of the problems we have are there already, the machines are there. The build up for Q3 is at this moment reasonably under control, so Q3 shipment July 1 would be, I would say on the standard situation where we don't control -- constrain the market. Your question about NAND before DRAM or vice-versa, I don't think it is product related. It is when do they need the capacity and I think again the reason why there is no urgency or there was no urgency on NAND in the past 6-9 months or so has been because the big players have overinvested and have been digesting a fairly good set of (inaudible) by the way. And the next batch is at this very moment being planned and I think it is again applications driven and/or volume driven and I think it is because they may have been disappointed about the SSDs and are getting the SSDs to re-ramp back into the Q3 timeframe. So its application driven, it not us. And is NXT machines, a good machine for logic, in fact we have been told by certain numbers of leaders of the logic arena that the challenge that the next generation nodes give them in overlay is such that they are very highly worried about process control, and therefore the more tolerance that you have or the less budget that you have for the machine addressed is fundamental decision making point. So we feel extremely happy with this difficulty. I should not say this in a cynical way, but we think the NXT is offering in fact a significant solution to this environment, in the logic environment, which is even worse in requirements than DRAM, which is a good user of NXT. So the only negative part of logic is it takes longer for them to build up the recipe and to ramp into production. So we would expect R&D to be done now; in fact, you have seen in the backlog I mentioned that we have a lot of IDMs who are in the NXT now in R&D but those guys will ramp probably production 2011.

Thank you very much.

Thank you.

Okay, to finish on behalf of ASML's Board of Management, I would like to thank you for joining us on the call today. And Nicole, if you could formally conclude the call for us, I would appreciate it. Thank you.

Of course, sir. Ladies and gentlemen, this concludes the ASML 2009 fourth quarter and annual results conference call. Thank you for participating, you may disconnect your line now.