November 17, 2006 – Photon Dynamics Inc., a San Jose, CA-based maker of flat-panel display (FPD) test and repair equipment, says it will discontinue its PanelMaster line of FPD inspection products, though it will meet all warranty and parts obligations for existing customers.

The move, which will generate a ~ $500,000 expense spread over the company’s fiscal 1Q07 and 2Q07, “represents a strategic realignment of our technical and financial resources, thus enabling the Company to focus on what we believe are more profitable business opportunities for the company,” stated Jeff Hawthorne, president and CEO.

Earlier this month Photon Dynamics posted fiscal 4Q06 revenues of $29.3 million, nearly half of what they were in the previous quarter, and flat with sales a year ago, with net loss widening to $6.1 million. Hawthorne said in a statement that business has slowed as display manufacturers scale back 2007 investment plans until they can evaluate a host of factors including TV manufacturing costs and holiday season demand, but called the slowdown “temporary.”

The company’s 1Q07 projections look bleak: $15-$20M in sales and a net loss widening further to $0.45-$0.55, vs. Wall Street expectations of $31.5 million in sales and an EPS loss of just $0.18.