Cascade Microtech Reports Second Quarter 2006 Results; Revenues of $19.6 Million, up 7% Over Last Year and EPS of 7 Cents; Record Bookings for the Quarter with Strong Book-to-Bill for Both Divisions

Highlights for the Second Quarter 2006 include:

-- Revenues of $19.6 million, up 7% over last year

-- Record bookings during the quarter with strong book-to-bill for both divisions

-- $3.6 million Production Probes Division revenue, up 56% over last year

-- $16.0 million Engineering Products Division revenue, flat with last year

-- EPS of $0.07 per diluted share, including stock compensation expense under SFAS123R

-- Effective tax rate of 33% for the quarter due to the expiration of the R&E credit.

"We were extremely pleased with our record bookings in the secondquarter of 2006. Book-to-bill was well above one in both divisions andwe built solid backlog in both probe cards and systems. Our ProductionProbe division revenue, however, was limited by our production andtest capabilities during the quarter. We are continuing to addemployees and equipment to build a larger probe card business," saidEric Strid, CEO of Cascade Microtech.

Revenue for the second quarter was $19.6 million, net income forthe quarter was $0.8 million and diluted earnings per share were$0.07, compared to revenue of $19.7 million, net income of $0.7million and diluted earnings per share of $0.06 for the first quarterof 2006.

Gross margin for the second quarter improved to 44.6% from 43.5%in the first quarter of 2006 primarily due to product mix.

Beginning in January 2006 we were required to expense the costs ofstock options through our income statement under SFAS 123R. Thisresulted in a charge to earnings of approximately $447,000 during thesecond quarter of 2006.

The effective tax rate for the second quarter was 33% in line withthe first quarter of 2006. The tax charge for the first and secondquarters does not include any benefit for research and experimentationtax credits since current legislation related to such credits hasexpired and has not yet been renewed.

Financial Outlook

Based on the current backlog and anticipated bookings, Cascadeanticipates that third quarter 2006 revenues will be in the range of$20.0 million to $21.5 million compared to $19.6 million in the secondquarter of 2006; and that diluted earnings per share will be in therange of $0.06 to $0.11, including stock compensation expense underSFAS 123R.

About Cascade Microtech

Cascade Microtech, Inc. (NASDAQ:CSCD) is a worldwide leader inthe precise electrical measurement and test of integrated circuits(ICs) and other small structures. For technology businesses andscientific institutions that need to evaluate small structures,Cascade Microtech delivers access to, and extraction of, electricaldata from wafers, integrated circuits (ICs), IC packages, circuitboards and modules, MEMs, biological structures, electro-optic devicesand more. Cascade Microtech's highly reliable production wafer testsolutions provide the semiconductor industry with leading-edge probecards that reduce manufacturing costs of complex semiconductors.Information about Cascade Microtech can be found on the Web atwww.cascademicrotech.com.

Forward-Looking Statements

The statements in this release regarding the Company's financialoutlook as to revenue and diluted earnings per share in the thirdquarter of 2006 are "forward-looking" statements within the meaning ofthe Securities Litigation Reform act of 1995. Such statements arebased on current expectations, estimates and projections about theCompany's business based in part on assumptions made by management.These statements are not guarantees of future performance and involverisks and uncertainties that are difficult to predict. Therefore,actual outcomes and results may differ materially from what isexpressed or forecasted in such forward-looking statements due tonumerous factors, including changes in demand for the Company'sproducts, product mix, the timing of shipments and customer orders,constraints on supplies of components, excess or shortage ofproduction capacity and other risks discussed from time to time in theCompany's Securities and Exchange Commission filings and reports,including the Company's Annual Report on Form 10-K. In addition suchstatements could be affected by general industry and market conditionsand growth rates and general domestic and international economicconditions. Such forward-looking statements speak only as of the dateon which they are made and the company does not undertake anyobligation to update any forward-looking statement to reflect eventsor circumstances after the date of this release.

The company will host a conference call beginning at 5 p.m. EST (2p.m. PST) on July 25, 2006 to discuss its results for the secondquarter ended June 30, 2006 and its outlook for the third quarter of2006.

A simultaneous audio cast of the conference call may be accessedonline from the investor relations page of www.cascademicrotech.com. Areplay will be available after 7 p.m. EST at this same internetaddress. (For a telephone replay, dial (888) 286-8010 pass code:15137563; International: 617-801-6888.)

CASCADE MICROTECH, INC.
AND SUBSIDIARIES

Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)



Three Months Ended Year to Date
June March June Ended
30, 31, 30, June 30,
2006 2006 2005 2006 2005
------- ------- ------- ------- -------

Sales $19,598 $19,699 $18,311 $39,297 $36,972

Cost of sales 10,739 11,020 9,651 21,759 19,141
Stock-based compensation 113 112 10 225 22
------- ------- ------- ------- -------

Gross profit 8,746 8,567 8,650 17,313 17,809
------- ------- ------- ------- -------

Operating expenses:
Research and development
(includes $77, $77, $4,
$154 and $8,
respectively, of
stock-based
compensation) 2,150 1,998 1,669 4,148 3,312
Selling, general and
administrative (includes
$258, $264, $11, $522
and $36, respectively,
of stock-based
compensation) 5,808 6,009 5,172 11,817 9,796
------- ------- ------- ------- -------

Total operating
expenses 7,958 8,007 6,841 15,965 13,108
------- ------- ------- ------- -------

Income from
operations 788 560 1,809 1,348 4,701
------- ------- ------- ------- -------

Other income (expense):
Interest income 405 362 258 767 470
Interest expense - - - - (16)
Other, net (10) 57 766 47 790
------- ------- ------- ------- -------

Total other
income
(expense) 395 419 1,024 814 1,244
------- ------- ------- ------- -------

Income before
income taxes 1,183 979 2,833 2,162 5,945

Provision for income taxes 387 323 602 710 1,219
------- ------- ------- ------- -------

Net income $ 796 $ 656 $ 2,231 $ 1,452 $ 4,726
======= ======= ======= ======= =======

Net income per share:
Basic $ 0.07 $ 0.06 $ 0.20 $ 0.13 $ 0.43
Diluted $ 0.07 $ 0.06 $ 0.19 $ 0.12 $ 0.40

Shares used in
computing net
income per
share:
Basic 11,411 11,373 10,916 11,392 10,890
Diluted 11,897 11,907 11,728 11,841 11,696


CASCADE MICROTECH, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets

June 30, 2006 and December 31, 2005


June 30, Dec. 31,
2006 2005
(unaudited)

Assets
------

Current assets:
Cash and cash equivalents $ 2,008 $ 2,224
Marketable securities 46,644 48,122
Accounts receivable net of allowances of
$83,812 and $97,051 17,399 16,182
Inventories 12,445 10,889
Prepaid expenses and other 2,047 3,000
Deferred income taxes 1,745 1,699
----------- --------

Total current assets 82,288 82,116

Long-term investments 4,972 1,549
Fixed assets, net 5,712 4,422
Deferred income tax 344 336
Other assets 1,881 1,697
----------- --------

$ 95,197 $ 90,120
=========== ========


Liabilities and Stockholders' Equity
------------------------------------

Current liabilities:
Current portion of long-term debt and
capital leases $ 4 $ 8
Accounts payable 4,860 3,904
Deferred revenue 562 516
Accrued liabilities 4,116 3,087
----------- --------

Total current
liabilities 9,542 7,515

Deferred revenue 241 255
Other long-term liabilities 802 845
----------- --------

Total liabilities 10,585 8,615
----------- --------

Stockholders' equity:
Common stock, $0.01 par value; 11,415,649
and 11,328,109 shares issued and
outstanding at June 30, 2006 and
December 31, 2005 59,896 58,400
Deferred stock-based compensation - (142)
Unrealized holding gain (loss) on
investments (59) (76)
Retained earnings 24,775 23,323
----------- --------

Total stockholders'
equity 84,612 81,505
----------- --------

$ 95,197 $ 90,120
=========== ========