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Advantest Corporation Company News Alert Significant decline in common stock price since our FY 2008 update report Common Stock
Ticker: Target price: Current price: Price change since last report:

11 July 2008

HOLD
6857.T ¥2,539 ¥2,105

Direct access to report full report free ofreflecting investor concerns regarding global our FY 2008 update the dated 10 June 2008, charge at economic health and slowdown in the semiconductor sector. On 10 July 2008, Gartner, Inc. (Gartner), http://www.iirgroup.com/researchoracle/viewreport/show/20284 19.8% reduced its y-o-y capital spending forecast for FY 2008 from its previous expectation of a
decline to a 22.4% y-o-y decline, the implications of which could further impact the company’s revenues in CY 2H 08. Given the current volatility in financial markets coupled with our cautious short term outlook for the company, we maintain our HOLD rating for the Advantest common stock although the current price suggests a BUY rating. We will reassess the common stock rating for once the company announces its 1Q 09 results on 25 July 2008. Although the current ADR price supports a BUY rating, we maintain our HOLD rating based on our fundamental outlook as we do not anticipate a significant positive currency impact in the medium term.

Advantest Corporation’s (Advantest) common stock price has witnessed a substantial decline since

(20.3%)

ADR
Ticker: Target price: Current price: Price change since last report:

HOLD
ATE US$24.18 US$19.70 (20.9%)

We will reassess the ADR (1 ADR = 1 common share) rating for Advantest once the company announces its 1Q 09 results on 25 July 2008.

Supervisor: Shilpen Shah Analyst: Abhilasha Jha Editor: Heloise Capon Global Research Director: Satish Betadpur, CFA Next news due: 1Q 09 results1, 25 July 2008

Investment horizon - short term actionable trading strategies
This report addresses the needs of strategic investors with a long term investment horizon of 6-12 months. If this report is provided to you by your broker under the Global Settlement, you may now also access (free of charge) the short term trading outlook that we publish from time to time for this issuer, looking at the coming 5-30 days for readers with a shorter trading horizon. These are available online only at www.researchoracle.com

In our FY 2008 update report dated 10 June 2008, we reiterated the Advantest common stock a HOLD on fundamental grounds with a 6-12 month target price of ¥2,539, indicating a potential downside of 4%. Since then, the common stock has declined 20.4%. In line with most technology stocks around the world, Advantest has experienced significant erosion in its stock price as the semiconductor industry continues to struggle in the context of an unstable global economy triggered by the subprime mortgage crisis in the US, inflationary pressures and reduced consumer spending. 2008 is not expected to be a good year for semiconductor equipment vendors as most manufacturers are reducing capacity expansion to counter declining demand and excess capacity built-up. On 10 July 2008, Gartner further reduced its global semiconductor capital spending forecast for 2008 from a 19.8% decline predicted in April 2008 to a 22.4% y-o-y decline. A further reduction in capital spending could further hamper Advantest’s top-line growth in CY 2H 08. In addition, reflecting macroeconomic concerns, the Topix Index has declined 6.8% since our previous update report, closing at 830.67 on 11 July 2008. Given the current volatility in financial markets coupled with our cautious short term outlook for the company, we maintain our current HOLD rating for the Advantest common stock.

Footnote
1 Note that we have used the US convention to report fiscal years (e.g. fiscal year ending 31 March 2008 as FY 2008). Some Japanese firms describe their fiscal year based on the start date, i.e. they refer to the fiscal year ending 31 March 2008 as FY 2007. Advantest follows the US convention of recognizing fiscal years.

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