TEGAL CORPORATION REPORTS FISCAL 2009 RESULTS

Petaluma, Calif., June 25, 2009 — Tegal Corporation (NASDAQ: TGAL), an innovator of specialized production solutions for the fabrication of advanced MEMS, power ICs and optoelectronic devices, today announced financial results for the fourth quarter and fiscal year 2009, which ended March 31, 2009.

Fiscal 2009 Highlights

• Fiscal year 2009 revenues were $13.1 million, compared to $32.9 million in the prior fiscal year.  Gross margins were 39.8%, compared to 42.6% in the prior year.  Operating loss and net loss for fiscal 2009 was ($7.9) million.

• The Company’s cash balance at the end of the fiscal year was $12.5 million, compared to $19.3 million at the end of fiscal 2008, and $12.7 million at the end of the third quarter of fiscal 2009.

• On September 16, 2008, the Company announced that it had completed the acquisition from Alcatel Micro Machining Systems (AMMS) and Alcatel Lucent, of their Deep Reactive Ion Etch (DRIE) and Plasma Enhanced Chemical Vapor Deposition (PECVD) products, and the related intellectual property.

• Following the fiscal year end, the Company established Tegal France, a wholly owned subsidiary, with offices located in the Haute Savoie capital of Annecy, which completed the  transition of the DRIE products and related intellectual property for 3D packaging and MEMS devices from France-based AMMS and Alcatel Lucent.

Financial Results

Fourth quarter revenues were $1.9 million, down from $7.4 million in prior year period.  Revenues for fiscal 2009 were $13.1 million, compared to $32.9 million for the prior fiscal year.

Fourth quarter gross margin was 26.3%, compared to 50.6% in the prior year period.  Fiscal 2009 gross margin was 39.8%, compared to 42.6% in fiscal 2008.

Operating loss for the fourth quarter was ($3.1) million, compared to net income of $0.8 million in the prior year period.  The Company’s operating loss for fiscal 2009 was ($7.9) million, compared to an operating income of $1.6 million in fiscal 2008.  Operating expenses during the fiscal year included approximately $2.4 million for non-cash charges for depreciation, amortization, and stock compensation expense.

Tegal reported a net loss of ($3.2) million, or ($0.39) per share, for the fiscal fourth quarter of 2009, compared to a net income of $15.2 million, or $2.12 per share for the prior year period.

Cash at the end of the fiscal fourth quarter of 2009 was $12.5 million, down $200,000 from $12.7 million at the end of the immediately preceding quarter and down $6.8 million from $19.3 million at the end of fiscal year 2008.

Systems backlog at the end of the quarter was $1.5 million, and is currently $4.3 million.

Retention of Cowen and Company, LLC

Despite unprecedented market conditions, Tegal secured system orders during the quarter from two new customers, one in North America and the second in Asia (see today’s related news announcement).  Throughout the fourth quarter, the Company maintained a strong cash position, while having no debt and few liabilities.  On the technology front, the development of Tegal’s advanced new-generation DRIE tool has reached completion, offering the industry a compelling new solution for complex 3D interconnects using thru-silicon vias (TSVs), which the Company believes will further expand the Company’s stake in the MEMS market.

However, even with rigorous cost-cutting initiatives and system sales, revenue levels remain below breakeven.  Furthermore, visibility is extremely poor industry-wide, which makes forecasting difficult.  These challenges have prompted the board of directors and management to explore all available strategic alternatives to optimize the Company’s future opportunities.  To assist in this effort, Tegal has retained the services of Cowen and Company, LLC.

“Doing what is right for our shareholders and employees means making pragmatic decisions based on prevailing market conditions,” said Thomas Mika, Chairman, President and Chief Executive Officer of Tegal.  “The simple fact is that we cannot indefinitely withstand the impact of a protracted industry downturn and a deep global recession.  It makes good business sense, therefore, to take early and decisive action to explore strategic alternatives, including the potential sale of the Company as a going concern.  We believe that our considerable intellectual property assets and our healthy share of select high-growth markets strengthen our position, while our cash balance allows time for careful consideration of the best possible options.”

The Company will not be conducting an earnings conference call this period, but intends to file its 10-K with the SEC on Friday, June 26.

Safe Harbor Statement

Except for historical information, matters discussed in this news release contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.  Forward-looking statements, which are based on assumptions and describe our future plans, strategies and expectations, are generally identifiable by the use of the words "anticipate," "believe," "estimate," "expect," "intend," "project" or similar expressions.  These forward-looking statements are subject to risks, uncertainties and assumptions about the Company including, but not limited to industry conditions, economic conditions, acceptance of new technologies, market acceptance of the Company's products and services, the Company’s exploration and execution of strategic alternatives.  All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph.  For a further discussion of these risks and uncertainties, please refer to the Company's periodic filings with the Securities and Exchange Commission.

About Tegal

Tegal is an innovator of specialized production solutions for the fabrication of advanced MEMS, power ICs and optoelectronic devices found in products like smart phones, networking gear, solid-state lighting, and digital imaging.  The Company’s plasma etch and deposition tools enable sophisticated manufacturing techniques, such as 3D interconnect structures formed by intricate silicon etch, also known as Deep Reactive Ion Etching (DRIE). Tegal combines proven expertise with practical system strategies to deliver application-specific solutions that are robust and reliable, and deliver exceptional process quality and high yields at a lower overall cost of ownership.  Headquartered in Petaluma, California, the company has more than 35 years of expertise and innovation in specialized technologies, over 100 patents, and an installed base of more than 1900 systems worldwide. Please visit us on the web at www.Tegal.com.

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