10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 001-06462

TERADYNE, INC.

(Exact name of registrant as specified in its charter)

Massachusetts	04-2272148
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
600 Riverpark Drive, North Reading, Massachusetts	01864
(Address of Principal Executive Offices)	(Zip Code)

978-370-2700

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer  x     Accelerated filer  ¨     Non-accelerated filer  ¨     Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of the registrant’s only class of Common Stock as of August 1, 2008 was 168,861,816 shares.

TERADYNE, INC.

INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets as of June 29, 2008 and December 31, 2007	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 29, 2008 and July  1, 2007	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 29, 2008 and July 1, 2007	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 4.	Submission of Matters to a Vote of Security Holders	34
Item 6.	Exhibits	34

2

PART I

Item 1: Financial Statements

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 29, 2008			December 31, 2007
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	286,094		$	562,371
Marketable securities		19,780			75,593
Accounts receivable, net of allowance for doubtful accounts of $4,256 and $4,493 on June 29, 2008 and December 31, 2007, respectively		212,458			189,487
Inventories:
Parts		50,288			27,627
Assemblies in process		42,486			31,272
Finished Goods		25,667			21,414
Net inventories		118,441			80,313
Deferred tax asset		30,779			3,216
Prepayments and other current assets		39,805			33,953
Total current assets		707,357			944,933
Property, plant, and equipment, at cost		830,809			825,771
Less: accumulated depreciation		477,704			473,064
Net property, plant, and equipment		353,105			352,707
Marketable securities		108,462			104,978
Goodwill		241,730			69,147
Intangible assets, net		96,593			5,992
Other assets		25,632			24,855
Long-term deferred tax assets		—			6,280
Retirement plans assets		48,028			46,396
Total assets	$	1,580,907		$	1,555,288
LIABILITIES
Current liabilities:
Accounts payable	$	80,456		$	57,426
Accrued employees’ compensation and withholdings		70,991			71,691
Deferred revenue and customer advances		53,781			41,928
Other accrued liabilities		46,330			47,002
Accrued income taxes		2,366			5,187
Total current liabilities		253,924			223,234
Retirement plans liabilities		77,876			80,388
Deferred tax liabilities		20,495			—
Long-term other accrued liabilities		30,705			22,492
Total liabilities		383,000			326,114
Commitments and contingencies (Note N)
SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized, 167,822 and 173,088 shares issued and outstanding at June 29, 2008 and December 31, 2007, respectively		20,977			21,636
Additional paid-in capital		1,103,956			1,105,441
Accumulated other comprehensive loss		(46,930	)		(46,028	)
Retained earnings		119,904			148,125
Total shareholders’ equity		1,197,907			1,229,174
Total liabilities and shareholders’ equity	$	1,580,907		$	1,555,288

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s

Annual Report on Form 10-K for the year ended December 31, 2007 are an integral part of the condensed

consolidated financial statements.

3

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended					For the Six Months Ended
	June 29, 2008			July 1, 2007		June 29, 2008			July 1, 2007
	(in thousands, except per share amounts)
Net revenues:
Products	$	248,779		$	229,504	$	481,770		$	424,137
Services		68,926			59,206		133,250			118,266
Net revenues		317,705			288,710		615,020			542,403
Cost of revenues:
Cost of products		124,925			112,338		243,232			212,329
Cost of services		38,932			39,152		79,437			79,457
Total cost of revenues		163,857			151,490		322,669			291,786
Gross profit		153,848			137,220		292,351			250,617
Operating expenses:
Engineering and development		56,154			52,417		111,303			101,679
Selling and administrative		65,463			62,182		130,684			125,129
Acquired intangible asset amortization		4,774			955		8,637			1,866
In-process research and development		—			—		1,100			16,700
Restructuring and other, net		12,726			568		24,511			2,815
Operating expenses		139,117			116,122		276,235			248,189
Income from operations		14,731			21,098		16,116			2,428
Interest income		2,932			9,299		7,544			19,398
Interest expense and other		(484	)		303		(14	)		2,545
Income from continuing operations before income taxes		17,179			30,700		23,646			24,371
Provision for income taxes		6,100			3,454		10,200			4,839
Income from continuing operations		11,079			27,246		13,446			19,532
Income from discontinued operations before taxes		—			618		—			711
Provision for income taxes		—			210		—			225
Income from discontinued operations		—			408		—			486
Net income	$	11,079		$	27,654	$	13,446		$	20,018
Income from continuing operations per common share:
Basic	$	0.06		$	0.14	$	0.08		$	0.10
Diluted	$	0.06		$	0.14	$	0.08		$	0.10
Net income per common share:
Basic	$	0.06		$	0.15	$	0.08		$	0.11
Diluted	$	0.06		$	0.14	$	0.08		$	0.10
Weighted average common share—basic		170,644			189,391		172,203			189,508
Weighted average common share—diluted		174,096			191,405		174,909			191,184

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2007 are an integral part of the condensed consolidated financial statements.

4

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Six Months Ended
	June 29, 2008			July 1, 2007
	(in thousands)
Cash flows from operating activities:
Net income	$	13,446		$	20,018
Income from discontinued operations		—			486
Income from continuing operations		13,446			19,532
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation		39,077			30,965
Amortization		9,720			3,904
Stock-based compensation		10,821			14,068
In-process research and development charge		1,100			16,700
Gain on sale of land and building		(1,682	)		—
Gain on sale of product lines		—			(906	)
Provision for inventory		3,254			1,062
Non-cash charge for the sale of inventories revalued at the date of acquisition		4,346			—
Other non-cash items, net		(291	)		1,312
Changes in operating assets and liabilities, net of businesses and product lines acquired and sold:
Accounts receivable		4,488			(55,795	)
Inventories		(1,223	)		24,327
Other assets		(6,195	)		(3,435	)
Accounts payable, deferred revenue and accrued expenses		10,410			(10,016	)
Retirement plans contributions		(3,717	)		(1,644	)
Income taxes payable		(2,608	)		(25,953	)
Net cash provided by continuing operations		80,946			14,121
Net cash used for discontinued operations		—			(2,998	)
Net cash provided by operating activities		80,946			11,123
Cash flows from investing activities:
Investments in property, plant and equipment		(56,702	)		(44,611	)
Acquisition of technology		—			(17,600	)
Proceeds from sale of product lines and business		—			906
Proceeds from sale of land and building		17,716			—
Acquisition of business, net of cash acquired		(285,324	)		—
Purchases of available-for-sale marketable securities		(40,581	)		(243,352	)
Proceeds from sale and maturities of available-for-sale marketable securities		89,777			132,244
Net cash used for continuing operations		(275,114	)		(172,413	)
Net cash used for discontinued operations		—			(189	)
Net cash used for investing activities		(275,114	)		(172,602	)
Cash flows from financing activities:
Repurchase of common stock		(91,191	)		(27,610	)
Issuance of common stock under employee stock option and stock purchase plans		9,082			14,279
Net cash used for financing activities		(82,109	)		(13,331	)
Decrease in cash and cash equivalents		(276,277	)		(174,810	)
Cash and cash equivalents at beginning of period		562,371			568,025
Cash and cash equivalents at end of period	$	286,094		$	393,215

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2007 are an integral part of the condensed consolidated financial statements.

5

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A. The Company

Teradyne, Inc. is a leading global supplier of automatic test equipment.

Teradyne’s automatic test equipment products and services include:

• semiconductor test (“Semiconductor Test”), and

• military/aerospace (“Mil/Aero”) test instrumentation and systems, circuit-board test and inspection systems (“Commercial Board Test”) and automotive diagnostic and test systems (“Diagnostic Solutions”), collectively “Systems Test Group”

Statements in this Quarterly Report on Form 10-Q which are not historical facts, so called “forward looking statements,” are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Investors are cautioned that all forward looking statements involve risks and uncertainties, including those detailed in Teradyne’s filings with the Securities and Exchange Commission (the “SEC”). See also “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Certain Factors That May Affect Future Results” and Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2007.

B. Accounting Policies

Basis of Presentation

The condensed consolidated interim financial statements include the accounts of Teradyne and its subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair statement of such interim financial statements. Certain prior year’s amounts were reclassified to conform to the current year presentation. The December 31, 2007 condensed consolidated balance sheet data were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles.

The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in Teradyne’s Annual Report on Form 10-K, filed with the SEC on February 28, 2008 for the year ended December 31, 2007.

On August 1, 2007, Teradyne completed the sale of Broadband Test Systems, its voice and broadband access network test division. The results of operations of Broadband Test Systems as well as cash flow amounts pertaining to this business have been classified as discontinued operations in the condensed consolidated financial statements.

Preparation of Financial Statements

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements. Actual results may differ significantly from these estimates.

6

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

C. Recently Issued Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), “Business Combinations.” (SFAS No. 141(R)) This Statement replaces FASB Statement No. 141, “Business Combinations.” SFAS No. 141(R) establishes new principles and requirements for how an acquiring company 1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree, 2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and 3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is effective for business combinations occurring in the fiscal year beginning on or after December 15, 2008. Teradyne is currently evaluating the impact of adopting this standard.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (SFAS No. 161), an amendment of FASB Statement No. 133. “Accounting for Derivative Instruments and Hedging Activities”. SFAS No. 161 expands the current disclosure requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” such that entities must now provide enhanced disclosures on a quarterly basis regarding how and why the entity uses derivatives; how derivatives and related hedged items are accounted for under SFAS No. 133 and how derivatives and related hedged items affect the entity’s financial position, performance and cash flow. SFAS No. 161 is effective prospectively for periods beginning on or after November 15, 2008. Teradyne will adopt SFAS No. 161 in fiscal year 2009.

In April 2008, the FASB issued Staff Position No.142-3 (FSP No. 142-3), “Determination of the Useful Life of Intangible Assets”. This FSP amends the guidance in FASB Statement No. 142 ,”Goodwill and Other Intangible Assets”, about estimating useful lives of recognized intangible assets and requires additional disclosures related to renewing or extending the terms of a recognized intangible asset. In estimating the useful life of a recognized intangible asset, the FSP requires companies to consider their historical experience in renewing or extending similar arrangements together with the asset’s intended use, regardless of whether the arrangements have explicit renewal or extension provisions. The FSP is effective for fiscal years beginning after December 15, 2008 and is to be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements are to be applied prospectively to all intangible assets.

D. Financial Instruments

Effective January 1, 2008, Teradyne has adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS No. 157) for financial assets and liabilities. As defined in SFAS No.157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Teradyne uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during the quarter or six months ended June 29, 2008. SFAS No.157 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted prices in active markets for identical assets as of the reporting date.

Level 2: Inputs other than Level 1, that are observable either directly or indirectly as of the reporting date. For example, a common approach for valuing fixed income securities is the use of matrix pricing. Matrix pricing is a mathematical technique used to value securities by relying on the securities’ relationship to other benchmark quoted prices, and therefore is considered a Level 2 input.

Level 3: Unobservable inputs that are not supported by market data. Unobservable inputs are developed based on the best information available, which might include Teradyne’s own data.

7

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Teradyne’s marketable securities consist primarily of high quality, corporate debt securities that are valued using matrix pricing. Teradyne has reviewed and agrees with the valuation methodologies and procedures utilized by these parties. The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of June 29, 2008.

	June 29, 2008
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Short-term marketable securities	$	—	$	19,780	$	—	$	19,780
Long-term marketable securities		9,390		99,072		—		108,462
Total	$	9,390	$	118,852	$	—	$	128,242

E. Product Warranty

Teradyne generally provides a one-year warranty on its products commencing upon installation or shipment. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience. Related costs are charged to the warranty accrual as incurred. The following represents the activity in the warranty accrual and is included in other accrued liabilities.

	For the Three Months Ended						For the Six Months Ended
	June 29, 2008			July 1, 2007			June 29, 2008			July 1, 2007
	(in thousands)
Balance at beginning of period	$	9,933		$	11,327		$	9,340		$	12,897
Acquisition		—			—			492			—
Accruals for warranties issued during the period		3,606			3,529			7,209			6,829
Accruals related to pre-existing warranties (includes changes in estimates)		577			(873	)		1,182			(1,870	)
Settlements made during the period		(4,334	)		(3,734	)		(8,441	)		(7,607	)
Balance at end of period	$	9,782		$	10,249		$	9,782		$	10,249

When Teradyne receives revenue for extended warranties beyond one year, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. The following represents the activity in the extended warranty and is included in short-term deferred revenue and long-term other accrued liabilities.

	For the Three Months Ended						For the Six Months Ended
	June 29, 2008			July 1, 2007			June 29, 2008			July 1, 2007
	(in thousands)
Balance at beginning of period	$	6,612		$	7,777		$	6,610		$	8,350
Deferral of new extended warranty revenue		1,686			1,115			2,880			1,934
Recognition of extended warranty deferred revenue		(1,195	)		(1,290	)		(2,387	)		(2,682	)
Balance at end of period	$	7,103		$	7,602		$	7,103		$	7,602

8

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

F. Stock-Based Compensation

During the six months ended June 29, 2008, Teradyne granted restricted stock units to employees, executives and directors. The total number of shares granted was 3.1 million at the weighted average grant date fair value of $10.66. Service based awards granted to employees and executives vest in equal installments over four years. A significant number of awards granted to executive officers were performance-based restricted stock units. The performance–based restricted stock units granted to the executives in January 2008 cliff vest on the third anniversary of the grant. The amount of actual performance-based awards that will vest will be determined on the first anniversary of the grant. Awards granted to non-employee directors vest on the first anniversary of the grant date.

During the six months ended July 1, 2007, Teradyne granted restricted stock units to employees, executives and directors. The total number of shares granted was 2.0 million at the weighted average grant date fair value of $15.27. Service based awards granted to employees and executives vest in equal installments over four years. A significant number of awards granted to executive officers were performance-based restricted stock units. The performance-based restricted stock units granted to the executives in January 2007 vest in equal installments over four years. The amount of actual performance-based awards that will vest was determined on the first anniversary of the grant. Awards granted to non-employee directors vested on the first anniversary of the grant date.

G. Comprehensive Income

Comprehensive income is calculated as follows:

	For the Three Months Ended						For the Six Months Ended
	June 29, 2008			July 1, 2007			June 29, 2008			July 1, 2007
	(in thousands)
Net income	$	11,079		$	27,654		$	13,446		$	20,018
Foreign currency translation adjustments		(233	)		256			(1,055	)		234
Change in unrealized loss on foreign exchange contracts		—			55			—			55
Change in unrealized loss on marketable securities, net of taxes of $0, $0, $0 and $0		(672	)		596			(3,126	)		2,165
Retirement plans net gain, net of taxes of $431, $22, $447 and $60		2,643			2,582			2,988			3,744
Retirement plans prior service benefit, net of taxes of $0, $0, $0 and $0		153			154			307			307
Retirement plans net transition asset, net of taxes of $(2), $(11), $(5) and $(18)		(16	)		(46	)		(16	)		(24	)
Comprehensive income	$	12,954		$	31,251		$	12,544		$	26,499

9

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

H. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill by segment are as follows:

	Semiconductor Test		Systems Test Group		Total
	(in thousands)
Balance at December 31, 2007	$	—	$	69,147	$	69,147
Goodwill acquired during period		172,583		—		172,583
Balance at June 29, 2008	$	172,583	$	69,147	$	241,730

Amortizable intangible assets consist of the following and are included in intangible and other assets:

	June 29, 2008
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life
	(in thousands)
Completed technology	$	72,793	$	20,875	$	51,918	6.2 years
Customer relationships and service and software maintenance contracts		50,679		6,812		43,867	6.9 years
Trade names and trademarks		4,100		3,292		808	7.5 years
Total intangible assets	$	127,572	$	30,979	$	96,593	6.5 years

	December 31, 2007
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life
	(in thousands)
Completed technology	$	19,193	$	15,734	$	3,459	7.5 years
Customer relationships and service and software maintenance contracts		4,779		3,678		1,101	8.0 years
Trade names and trademarks		3,800		2,929		871	8.0 years
Acquired workforce		700		139		561	4.0 years
Total intangible assets	$	28,472	$	22,480	$	5,992	7.6 years

Aggregate intangible asset amortization expense was $4.8 million for the three months ended June 29, 2008 and $1.0 million for the three months ended July 1, 2007. Aggregate intangible asset amortization expense was $8.6 million for the six months ended June 29, 2008 and $1.9 million for the six months ended July 1, 2007. Estimated intangible asset amortization expense for each of the five succeeding fiscal years is as follows:

Year	Amount
	(in thousands)
2008 (remainder)	$	10,068
2009		19,368
2010		16,697
2011		15,239
2012		13,112

10

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

I. Net Income per Common Share

The following table sets forth the computation of basic and diluted net income per common share:

	For the Three Months Ended				For the Six Months Ended
	June 29, 2008		July 1, 2007		June 29, 2008		July 1, 2007
	(in thousands, except per share amounts)
Income from continuing operations	$	11,079	$	27,246	$	13,446	$	19,532
Income from discontinued operations		—		408		—		486
Net income	$	11,079	$	27,654	$	13,446	$	20,018
Shares used in income per common share—basic		170,644		189,391		172,203		189,508
Effect of dilutive potential common shares:
Employee and director stock options		1,986		1,169		1,582		1,057
Restricted stock units		1,269		742		999		552
Employee stock purchase rights		197		103		125		67
Dilutive potential common shares		3,452		2,014		2,706		1,676
Shares used in net income per common share—diluted		174,096		191,405		174,909		191,184
Net income per common share—basic
Continuing operations	$	0.06	$	0.14	$	0.08	$	0.10
Discontinued operations		—		0.01		—		0.01
	$	0.06	$	0.15	$	0.08	$	0.11
Net income per common share—diluted
Continuing operations	$	0.06	$	0.14	$	0.08	$	0.10
Discontinued operations		—		—		—		—
	$	0.06	$	0.14	$	0.08	$	0.10

The computation of diluted net income per common share for the three and six months ended June 29, 2008 excludes the effect of the potential exercise of options to purchase approximately 13.6 million and 14.2 million shares and restricted stock units of 1.2 million and 1.3 million shares, respectively, because the effect would have been anti-dilutive.

The computation of diluted net income per common share for the three and six months ended July 1, 2007 excludes the effect of the potential exercise of options to purchase approximately 14.4 million and 14.6 million shares, respectively, because the effect would have been anti-dilutive.

J. Restructuring and Other, Net

The tables below represent activity related to restructuring and other, net, in the six months ended June 29, 2008. The accrual for severance payments and employees’ benefits is reflected in accrued employees’ compensation and withholdings and is expected to be paid by the end of the fourth quarter of 2008. The accrual for lease payments on vacated facilities is reflected in other accrued liabilities and other long-term accrued liabilities and is expected to be paid over the lease terms, the latest of which expires in 2012. Teradyne expects to pay approximately $3.2 million against the lease accruals over the next twelve months. Teradyne’s future lease commitments are net of expected sublease income of $8.9 million as of June 29, 2008.

11

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2008 Activities

(in thousands)	Gain on Sale of Real Estate			Facility Related			Severance and Benefits			Long-Lived Asset Impairment			Total
Balance at December 31, 2007	$	—		$	—		$	—		$	—		$	—
Charges/ (Credits)		(1,682	)		10,344			12,949			550			22,161
Cash payments		—			(593	)		(8,822	)		—			(9,415	)
Accelerated depreciation and other		1,682			(8,975	)		—			(550	)		(7,843	)
Balance at June 29, 2008	$	—		$	776		$	4,127		$	—		$	4,903

During the six months ended June 29, 2008, Teradyne recorded the following restructuring activities:

• $12.9 million of severance charges across all functions and segments related to headcount reductions of 261 people;

• $9.0 million of facility charges across both segments related to the accelerated depreciation of a manufacturing facility in North Reading, MA as a result of the transfer of manufacturing to an outsourced partner;

• $0.4 million of facility charges across both segments related to the early exit of a facility in Bracknell, UK;

• $0.7 million of facility charges in the Semiconductor Test segment related to the early exit of a facility in Ontario, Canada;

• $1.7 million gain on the sale of real estate in the Semiconductor Test segment for a facility in Agoura Hills, CA; and

• $0.6 million charge in the Semiconductor Test segment for a long-lived asset impairment related to acquired intangible assets.

2007 Activities

(in thousands)	Severance and Benefits
Balance at December 31, 2007	$	1,108
Credits		(194	)
Cash payments		(556	)
Balance at June 29, 2008	$	358

Pre-2007 Activities

(in thousands)	Facility Related			Severance and Benefits			Total
Balance at December 31, 2007	$	7,802		$	250		$	8,052
Charges/ (Credits)		2,676			(132	)		2,544
Cash payments		(895	)		(62	)		(957	)
Balance at June 29, 2008	$	9,583		$	56		$	9,639

12

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During the six months ended June 29, 2008, Teradyne recorded the following adjustment to its pre-2007 restructuring activities:

• $2.7 million facility related charge in the Systems Test Group segment for changes in the estimated amount and timing of sublease income on a facility in Westford, MA.

K. Stock Repurchase Program

In November 2007, Teradyne’s Board of Directors authorized a $400 million stock repurchase program. During the three months ended June 29, 2008, Teradyne repurchased 4.7 million shares of common stock for $58.2 million at an average price of $12.46. For the six months ended June 29, 2008, Teradyne repurchased 7.5 million shares of common stock for $91.2 million at an average price of $12.20 per share. The cumulative repurchases as of June 29, 2008 total 8.5 million shares of common stock for $102.6 million at an average price of $12.14.

L. Acquisitions

Business

On January 24, 2008, Teradyne completed its acquisition of Nextest Systems Corporation (“Nextest”) of San Jose, California, for a total purchase price of $401.6 million, which consisted of $367.8 million of cash paid to acquire the outstanding common stock of Nextest, at a price of $20.00 per share, $27.7 million in fair value of assumed vested stock options and restricted stock units, which were converted into stock options and restricted stock units to purchase Teradyne’s common stock, and $6.1 million of acquisition related transaction costs, which primarily consisted of fees incurred for financial advisory and legal services. The fair value of stock options was estimated using the following weighted average assumptions:

Expected life	3.6	years
Expected volatility	40.6	%
Risk-free interest rate	2.8	%
Dividend yield	0.0	%

Nextest designs, develops, manufactures, sells and services low-cost, high throughput automated test equipment systems for the semiconductor industry. Nextest competes in the flash memory, flash card, and flash memory based system-on-chip (“SOC”) markets. Nextest’s products are used to test flash memory, microcontrollers, image sensors, smart cards and field programmable logic devices. The acquisition allows Teradyne to enter the flash memory test segment. Nextest is included within Teradyne’s Semiconductor Test segment.

13

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Nextest acquisition was accounted for as a purchase business combination and, accordingly, the results have been included in Teradyne’s consolidated results of operation from the date of acquisition. The allocation of the total purchase price of Nextest’s net tangible and identifiable intangible assets was based on their estimated fair values as of the acquisition date. The purchase price allocation is preliminary pending the final determination of the fair value of certain acquired tax assets and assumed tax liabilities and the completion of facility exit and restructuring plans. The excess of the purchase price over the identifiable intangible and net tangible assets in the amount of $172.6 million was allocated to goodwill, which is not deductible for tax purposes. The following represents the preliminary allocation of the purchase price:

	Amount
	(in thousands)
Goodwill	$	172,583
Other intangible assets		99,800
Tangible assets acquired and liabilities assumed:
Cash and cash equivalents		88,513
Other current assets		55,332
Non-current assets		16,306
Accounts payable and current liabilities		(26,487	)
Other long-term liabilities		(5,542	)
In-process research and development		1,100
Total purchase price	$	401,605

Teradyne estimated the fair value of other intangible assets using the income approach. Acquired other intangible assets will be amortized on a straight-line basis over their estimated useful lives. The following table represents components of these other intangible assets and their estimated useful lives at the acquisition date:

	Fair Value		Estimated Useful Life
	(in thousands)		(in years)
Developed technology	$	53,600	5.8
Customer relationships		45,900	6.8
Tradenames		300	1.0
Total intangible assets	$	99,800	6.2

The following pro forma information gives effects of the acquisition as if the acquisition occurred on January 1, 2008 and 2007. The pro forma results are not necessarily indicative of what actually would have occurred had the acquisitions been in effect for the periods presented:

	For the Three Months Ended		For the Six Months Ended
	July 1, 2007		June 29, 2008		July 1, 2007
Revenue	$	302,490	$	624,751	$	577,335
Net income (loss)		19,246		13,086		(145	)
Net income per common share:
Basic	$	0.10	$	0.08	$	0.00
Diluted	$	0.10	$	0.07	$	0.00

14

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The six months pro forma results above include the following non recurring expense items: in-process research and development charge of $1.1 million and acquired inventory fair value adjustment of $4.3 million, in both six months periods presented.

Technology

On March 7, 2007, Teradyne purchased in-process enabling test technology and hired certain engineers from MOSAID Technologies Inc. (“MOSAID”) for $17.6 million, which included $0.6 million in fees directly related to the acquisition. Of the purchase price, $16.7 million was allocated to in-process research and development and therefore was immediately charged to the statement of operations. The balance of the purchase price was allocated to acquired workforce and fixed assets. In the three months ended June 29, 2008, Teradyne recorded an impairment charge of $0.6 million to write-off the acquired workforce asset.

M. Retirement Plans

Defined Benefit Pension Plans

Teradyne has defined benefit pension plans covering a portion of domestic employees and employees of certain non-U.S. subsidiaries. Benefits under these plans are based on employees’ years of service and compensation. Teradyne’s funding policy is to make contributions to the plans in accordance with local laws and to the extent that such contributions are tax deductible. The assets of the plans consist primarily of equity and fixed income securities. In addition, Teradyne has an unfunded supplemental executive defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement Income Security Act and the Internal Revenue Code, as well as unfunded foreign plans.

Components of net periodic pension cost for all plans for the three and six months ended June 29, 2008 and July 1, 2007 are as follows:

	For the Three Months Ended						For the Six Months Ended
	June 29, 2008			July 1, 2007			June 29, 2008			July 1, 2007
	(in thousands)
Net Periodic Benefit Cost:
Service cost	$	1,107		$	1,268		$	2,490		$	2,811
Interest cost		4,418			4,118			8,856			8,274
Expected return on plan assets		(5,167	)		(4,879	)		(10,345	)		(9,762	)
Amortization of unrecognized:
Net transition obligation		(7	)		(17	)		(15	)		(33	)
Prior service cost		212			213			424			424
Net loss		346			847			713			1,822
Curtailment gain		(357	)		—			(357	)		—
Total expense	$	552		$	1,550		$	1,766		$	3,536

Teradyne contributed $0.8 million to its United Kingdom Pension Plan, $0.6 million to its Japan Pension Plan, $0.6 million to its U.S. Pension Plan and $0.3 million to its other foreign Pension Plans in the six months ended June 29, 2008.

15

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Post-Retirement Benefit Plans

In addition to receiving pension benefits, Teradyne’s U.S. employees who meet specific retirement eligibility requirements as of their termination dates may participate in Teradyne’s Welfare Plan, which includes death benefits, and medical and dental benefits up to age 65. Death benefits provide a fixed amount to retirees’ survivors and are available to all retirees.

Substantially all of Teradyne’s current U.S. employees could become eligible for these benefits, and the existing benefit obligation relates primarily to those employees.

Components of net periodic postretirement benefits cost are as follows:

	For the Three Months Ended						For the Six Months Ended
	June 29, 2008			July 1, 2007			June 29, 2008			July 1, 2007
	(in thousands)
Net Periodic Benefit Cost:
Service cost	$	22		$	71		$	84		$	127
Interest cost		291			317			613			658
Amortization of unrecognized:
Prior service cost		(59	)		(59	)		(117	)		(118	)
Net loss		17			50			70			143
Total expense	$	271		$	379		$	650		$	810

Teradyne contributed $1.4 million to its U.S. Post-Retirement Benefits Plan in the six months ended June 29, 2008.

N. Commitments and Contingencies

Legal Claims

On September 5, 2001, after Teradyne’s August 2000 acquisition of Herco Technology Corp. and Perception Laminates, Inc., the former owners of those companies filed a complaint against Teradyne and two of our then executive officers in the Federal District Court in San Diego, California, asserting securities fraud and breach of contract related to the acquisition. The District Court dismissed certain of the plaintiffs’ claims, granted partial summary judgment against them with respect to their breach of contract claim and denied their motion for reconsideration. In July 2007, after an appeal by the plaintiffs, the U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the District Court rulings. Teradyne petitioned the Ninth Circuit for a rehearing of the ruling that it reversed. In October 2007, the Ninth Circuit denied Teradyne’s petition for rehearing. Teradyne continues to defend the claim that was sent back to the District Court.

In 2001, Teradyne was designated as a Potentially Responsible Party (“PRP”) at a clean-up site in Los Angeles, California. This claim arose out of Teradyne’s acquisition of Perception Laminates in August 2000. Prior to that date, Perception Laminates had itself acquired certain assets of Alco Industries Inc. under an asset purchase agreement in 1992. Neither Teradyne nor Perception Laminates have ever conducted any operations at the Los Angeles site. Teradyne asked the State of California to drop the PRP designation, but California has not yet agreed to do so.

Teradyne believes that it has meritorious defenses against the above unsettled claims and intends to vigorously contest them. While it is not possible to predict or determine the outcomes of the unsettled claims or

16

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

to provide possible ranges of losses that may arise, Teradyne believes the potential losses associated with all of these actions will not have a material adverse effect on its consolidated financial position or liquidity, but could possibly be material to its consolidated results of operations of any one period.

In addition, Teradyne is subject to legal proceedings, claims and investigations that arise in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. Although there can be no assurance, there are no such matters pending that Teradyne expects to be material with respect to its business, financial position or results of operations.

O. Segment Information

Teradyne’s two reportable segments are Semiconductor Test and Systems Test Group. The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The Systems Test Group segment includes operations related to the design, manufacturing and marketing of military/aerospace instrumentation test products and services, circuit-board test and inspection products and services, and automotive diagnostic and test products and services.

Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income from continuing operations before taxes. The accounting policies of the business segments are the same as those described in Note B: “Accounting Policies” in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2007. Due to the sale of Broadband Test Systems on August 1, 2007, its results have been excluded from segment reporting and included in discontinued operations for the three and six months ended July 1, 2007. Segment information for the three and six months ended June 29, 2008 and July 1, 2007 is as follows:

	Semiconductor Test			Systems Test Group			Corporate and Eliminations		Consolidated
	(in thousands)
Three months ended June 29, 2008:
Net sales	$	263,588		$	54,117		$	—	$	317,705
Income from continuing operations before taxes(1)(2)		18,983			(3,898	)		2,094		17,179
Three months ended July 1, 2007:
Net sales	$	230,681		$	58,029		$	—	$	288,710
Income from continuing operations before taxes(1)(2)		15,279			5,621			9,800		30,700
Six months ended June 29, 2008:
Net sales	$	511,251		$	103,769		$	—	$	615,020
Income from continuing operations before taxes(1)(2)		23,542			(6,607	)		6,711		23,646
Six months ended July 1, 2007:
Net sales	$	424,649		$	117,754		$	—	$	542,403
Income from continuing operations before taxes(1)(2)		(6,387	)		9,451			21,307		24,371

(1) Net interest income is included in Corporate and Eliminations.

(2) Included in the income from continuing operations before taxes for each of the segments for the three and six months ended June 29, 2008 and July 1, 2007 are charges that include restructuring and other, net, in-process research and development and inventory charges, as follows:

17

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Included in the Semiconductor Test segment are charges for the following:

	For the Three Months Ended				For the Six Months Ended
	June 29, 2008		July 1, 2007		June 29, 2008		July 1, 2007
	(in thousands)
Cost of revenues—inventory charges	$	884	$	304	$	2,039	$	354
Restructuring and other, net		8,901		1,483		19,033		2,572
In-process research and development		—		—		1,100		16,700
Total	$	9,785	$	1,787	$	22,172	$	19,626

Included in the Systems Test Group segment are charges for the following:

	For the Three Months Ended					For the Six Months Ended
	June 29, 2008		July 1, 2007			June 29, 2008		July 1, 2007
	(in thousands)
Cost of revenues—inventory charges	$	1,022	$	297		$	1,215	$	708
Restructuring and other, net		3,311		(1,056	)		4,745		(296	)
Total	$	4,333	$	(759	)	$	5,960	$	412

Included in the Corporate and Eliminations segment are charges for the following:

	For the Three Months Ended				For the Six Months Ended
	June 29, 2008		July 1, 2007		June 29, 2008		July 1, 2007
	(in thousands)
Restructuring and other, net	$	514	$	141	$	733	$	539
Total	$	514	$	141	$	733	$	539

18

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies and Estimates

We have identified the policies which are critical to understanding our business and our results of operations. Management believes that there have been no significant changes during the six months ended June 29, 2008 to the items disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

	For the Three Months Ended				For the Six Months Ended
	June 29, 2008		July 1, 2007		June 29, 2008		July 1, 2007
Percentage of total net revenues:
Products	78	%	79	%	78	%	78	%
Services	22		21		22		22
Total net revenues	100		100		100		100
Cost of revenues:
Cost of products	39		39		39		39
Cost of services	13		13		13		15
Total cost of revenues	52		52		52		54
Gross profit	48		48		48		46
Operating expenses:
Engineering and development	18		18		18		19
Selling and administrative	21		22		21		23
Acquired intangible asset amortization	1		—		2		—
In-process research and development	—		—		—		3
Restructuring and other, net	4		—		4		1
Operating expenses	44		40		45		46
Income from operations	4		8		3		—
Interest & Other	1		3		1		4
Income from continuing operations before income taxes	5		11		4		4
Provision for income taxes	2		1		2		—
Income from continuing operations	3		10		2		4
Income from discontinued operations	—		—		—		—
Provision for income taxes	—		—		—		—
Income from discontinued operations	—		—		—		—
Net income	3	%	10	%	2	%	4	%
Provision for income taxes as a percentage of income from continuing operations before income taxes	36	%	11	%	43	%	20	%

19

Second Quarter 2008 Compared to Second Quarter 2007

Bookings

Net bookings for our two reportable segments were as follows:

	For the Three Months Ended				Dollar Change
	June 29, 2008		July 1, 2007
	(in millions)
Semiconductor Test	$	260.6	$	259.2	$	1.4
Systems Test Group		47.3		47.4		(0.1	)
	$	307.9	$	306.6	$	1.3

Semiconductor Test orders increased 1% or $1.4 million from the second quarter of 2007 to 2008 due primarily to the acquisition of Nextest which offset a decrease in Teradyne’s Semiconductor Test orders.

Customers may delay delivery of products or cancel orders suddenly and without significant notice, subject to possible cancellation penalties. In the second quarter of 2008 and 2007, there were no significant cancellations penalties received. Due to possible changes in delivery schedules and cancellations of orders, our backlog at any particular date is not necessarily indicative of the actual sales for any succeeding period. Delays in delivery schedules and/or cancellations of backlog during any particular period could have a material adverse effect on our business, financial condition and results of operations.

Net bookings by region as a percentage of total net bookings were as follows:

	For the Three Months Ended
	June 29, 2008		July 1, 2007
Taiwan	22	%	24	%
United States	22		15
Singapore	18		13
South East Asia	14		17
Japan	10		7
Europe	7		10
Korea	6		13
Rest of World	1		1
	100	%	100	%

Backlog of unfilled orders for our two reportable segments was as follows:

	For the Three Months Ended
	June 29, 2008		July 1, 2007
	(in millions)
Semiconductor Test	$	270.3	$	250.6
Systems Test Group		93.5		93.1
	$	363.8	$	343.7

20

Revenue

Net revenues for our two reportable segments were as follows:

	For the Three Months Ended				Dollar Change
	June 29, 2008		July 1, 2007
	(in millions)
Semiconductor Test	$	263.6	$	230.7	$	32.9
Systems Test Group		54.1		58.0		(3.9	)
	$	317.7	$	288.7	$	29.0

Semiconductor Test revenue increased $32.9 million or 14% from the second quarter of 2007 to the second quarter of 2008. The majority of this increase is due to $21.4 million of sales from our Nextest acquisition, followed by an increase in revenue for J750^™ systems, and to a lesser extent, higher Flex^® family system sales resulting from a growth in wireless demand in the second quarter of 2008 compared to the second quarter of 2007.

The decrease in Systems Test Group revenue of $3.9 million or 7% was spread across all Systems Test Group divisions.

Our sales by region as a percentage of total net sales were as follows:

	For the Three Months Ended
	June 29, 2008		July 1, 2007
Taiwan	23	%	19	%
United States	19		21
South East Asia	18		16
Japan	11		11
Europe	10		10
Singapore	9		15
Korea	7		6
Rest of the World	3		2
	100	%	100	%

Gross Profit

Our gross profit was as follows:

	For the Three Months Ended						Dollar/ Point Change
	June 29, 2008			July 1, 2007
	(in millions)
Gross Profit	$	153.8		$	137.2		$	16.6
Percent of Total Revenue		48.4	%		47.5	%		0.9

Gross profit as a percentage of revenue increased from the second quarter of 2007 to the second quarter of 2008 by 0.9 percentage points due to higher volume and improved service margins in our Semiconductor Test group.

21

We assess the carrying value of our inventory on a quarterly basis by estimating future demand and comparing that demand against on-hand and on-order inventory provisions. Forecasted revenue information is obtained from the sales and marketing groups and incorporates factors such as backlog and future revenue demand. This quarterly process identifies obsolete and excess inventory. Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items that are not expected to be consumed during the next four quarters, is written down to estimated net realizable value.

The provisions for excess and obsolete inventory were $1.9 million and $0.6 million for the three months ended June 29, 2008 and July 1, 2007, respectively. During the three months ended June 29, 2008 and July 1, 2007, we scrapped $2.3 million and $3.9 million of inventory, respectively, and sold $0.2 million and $0.6 million of previously written-down or written-off inventory, respectively. As of June 29, 2008, we have inventory related reserves for amounts which had been written-down or written-off totaling $100.4 million. We have no pre-determined timeline to scrap the remaining inventory.

Engineering and Development

Engineering and development expenses were as follows:

	For the Three Months Ended						Dollar Change
	June 29, 2008			July 1, 2007
	(in millions)
Engineering and Development	$	56.2		$	52.4		$	3.8
Percent of Total Revenue		17.7	%		18.2	%

The increase of $3.8 million in engineering and development expenses is due to the acquisition of Nextest.

Selling and Administrative

Selling and administrative expenses were as follows:

	For the Three Months Ended						Dollar Change
	June 29, 2008			July 1, 2007
	(in millions)
Selling and Administrative	$	65.5		$	62.2		$	3.3
Percent of Total Revenue		20.6	%		21.5	%

The increase of $3.3 million from the second quarter of 2007 to 2008 is primarily due to the acquisition of Nextest, which is offset in part by $2.5 million of lower variable employee compensation and $1.5 million of lower general and administrative expenses and facilities costs.

Restructuring and Other, Net

The tables below represent activity related to restructuring and other, net, in the three months ended June 29, 2008. The accrual for severance payments and employees’ benefits is reflected in accrued employees’ compensation and withholdings, and is expected to be paid by the end of the fourth quarter of 2008. The accrual for lease payments on vacated facilities is reflected in other accrued liabilities and other long-term accrued liabilities and is expected to be paid over the lease terms, the latest of which expires in 2012. We expect to pay approximately $3.2 million against the lease accruals over the next twelve months. Our future lease commitments are net of expected sublease income of $8.9 million as of June 29, 2008.

22

2008 Activities

(in thousands)	Gain on Sale of Real Estate			Facility Related			Severance and Benefits			Long-Lived Asset Impairment			Total
Balance at March 30, 2008	$	—		$	184		$	1,825		$	—		$	2,009
Charges/ (Credits)		(1,682	)		5,672			5,517			550			10,057
Cash payments		—			(593	)		(3,215	)		—			(3,808	)
Accelerated depreciation and other		1,682			(4,487	)		—			(550	)		(3,355	)
Balance at June 29, 2008	$	—		$	776		$	4,127		$	—		$	4,903

During the three months ended June 29, 2008, we recorded the following restructuring activities:

• $5.5 million of severance charges across all functions and segments related to headcount reductions of 104 people;

• $4.5 million of facility charges across both segments related to accelerated depreciation of a manufacturing facility in North Reading, MA as a result of the transfer of manufacturing to an outsourced partner;

• $0.2 million of facility charges across both segments related to the early exit of a facility in Bracknell, UK;

• $0.7 million of facility charges in our Semiconductor Test segment related to the early exit of a facility in Ontario, Canada;

• $1.7 million gain on the sale of real estate in our Semiconductor Test segment for a facility in Agoura Hills, CA; and

• $0.6 million charge in our Semiconductor Test segment for a long-lived asset impairment related to acquired intangible assets.

The restructuring actions taken during the three months ended June 29, 2008, are expected to generate quarterly cost savings of approximately $2.8 million.

2007 Activities

(in thousands)	Severance and Benefits
Balance at March 30, 2008	$	477
Charges		(7	)
Cash payments		(112	)
Balance at June 29, 2008	$	358

Pre-2007 Activities

(in thousands)	Facility Related			Severance and Benefits		Total
Balance at March 30, 2008	$	7,083		$	42	$	7,125
Credits		2,676			—		2,676
Cash payments		(176	)		14		(162	)
Balance at June 29, 2008	$	9,583		$	56	$	9,639

23

During the three months ended June 29, 2008, we recorded the following adjustment to our pre-2007 restructuring activities:

• $2.7 million facility related charge in our Systems Test Group segment for changes in the estimated amount and timing of sublease income on a facility in Westford, MA.

Interest Income and Other, net

Interest income decreased by $6.4 million from $9.3 million in the second quarter of 2007 to $2.9 million in the second quarter of 2008, due primarily to lower cash balances as a result of the acquisition of Nextest and stock repurchase activity.

Income Taxes

The tax expense of $6.1 million and $3.5 million for the second quarter of 2008 and for the second quarter of 2007, consists of foreign taxes and U.S. Federal tax for 2008 and primarily foreign taxes for 2007. The effective tax rate of 36% for the second quarter of 2008 was caused by foreign losses for which no tax benefit was recorded. As a result of incurring significant operating losses from 2001 through 2003, we determined that it is more likely than not that our deferred tax assets in the U.S. may not be realized, and since the fourth quarter of 2002 we have established a full valuation allowance for these net deferred tax assets. If we generate sustained future taxable income against which these tax attributes may be applied, some portion or all of the valuation allowance would be reversed. If the valuation allowance was reversed, a portion would be recorded as an increase to additional paid in capital, and the remainder would be recorded as a reduction to income tax expense.

Six Months of 2008 Compared to Six Months of 2007

Bookings

Net bookings for our two reportable segments were as follows:

	For the Six Months Ended				Dollar Change
	June 29, 2008		July 1, 2007
	(in millions)
Semiconductor Test(1)	$	524.4	$	461.9	$	62.5
Systems Test Group		94.9		90.6		4.3
	$	619.3	$	552.5	$	66.8

(1) Includes Nextest bookings from January 24, 2008 through June 29, 2008.

Semiconductor Test orders increased 14% or $62.5 million from the first six months of 2007 to the first six months of 2008 due primarily to the acquisition of Nextest. The remainder of the increase was in service orders, as annual service contracts that are typically booked in the fourth quarter shifted into the first quarter of 2008.

Systems Test Group increase in orders of $4.3 million or 5% was primarily due to strong program buying in the Mil/ Aero business unit.

Customers may delay delivery of products or cancel orders suddenly and without significant notice, subject to possible cancellation penalties. In the first half of 2008 and 2007, there were no significant cancellations penalties received. Due to possible changes in delivery schedules and cancellations of orders, our backlog at any particular date is not necessarily indicative of the actual sales for any succeeding period. Delays in delivery schedules and/or cancellations of backlog during any particular period could have a material adverse effect on our business, financial condition and results of operations.

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Net bookings by region as a percentage of total net bookings were as follows:

	For the Six Months Ended
	June 29, 2008		July 1, 2007
Taiwan	23	%	18	%
United States	20		19
South East Asia	17		15
Singapore	12		16
Japan	10		12
Europe	9		11
Korea	8		8
Rest of the World	1		1
	100	%	100	%

Revenue

Net revenues for our two reportable segments were as follows:

	For the Six Months Ended				Dollar Change
	June 29, 2008		July 1, 2007
	(in millions)
Semiconductor Test	$	511.2	$	424.6	$	86.6
Systems Test Group		103.8		117.8		(14.0	)
	$	615.0	$	542.4	$	72.6

Semiconductor Test revenue increased $86.6 million or 20% from the first six months of 2007 to the first six months of 2008 due primarily to the Nextest acquisition. The remainder of the increase was in both Flex family, due to strength in demand for systems with wireless configurations, and J750 products.

The decrease in Systems Test Group revenue of $14.0 million or 12% resulted from a decrease in our Commercial Board Test and Diagnostic Solutions business units.

Our sales by region as a percentage of total net sales were as follows:

	For the Six Months Ended
	June 29, 2008		July 1, 2007
Taiwan	21	%	13	%
United States	19		24
South East Asia	19		14
Japan	11		12
Singapore	9		15
Europe	9		12
Korea	8		7
Rest of the World	4		3
	100	%	100	%

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Gross Profit

Our gross profit was as follows:

	For the Six Months Ended						Dollar/ Point Change
	June 29, 2008			July 1, 2007
	(in millions)
Gross Profit	$	292.4		$	250.6		$	41.8
Percent of Total Revenue		47.5	%		46.2	%		1.3

Gross margins as a percentage of revenue increased from the first six months of 2007 to the first six months of 2008 by 1.3 percentage points. This increase is the result of higher volume and improved service margins, offset in part by a $4.3 million charge to adjust Nextest inventory to fair value.

We assess the carrying value of our inventory on a quarterly basis by estimating future demand and comparing that demand against on-hand and on-order inventory provisions. Forecasted revenue information is obtained from the sales and marketing groups and incorporates factors such as backlog and future revenue demand. This quarterly process identifies obsolete and excess inventory. Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items that are not expected to be consumed during the next four quarters, is written down to estimated net realizable value.

The provisions for excess and obsolete inventory were $3.3 million and $1.1 million for the six months ended June 29, 2008 and July 1, 2007, respectively. During the six months ended June 29, 2008 and July 1, 2007, we scrapped $10.1 million and $9.2 million of inventory, respectively, and sold $1.3 million and $0.6 million of previously written-down or written-off inventory, respectively. As of June 29, 2008, we have inventory related reserves for amounts which had been written-down or written-off of $100.4 million. We have no pre-determined timeline to scrap the remaining inventory.

Engineering and Development

Engineering and development expenses were as follows:

	For the Six Months Ended						Dollar Change
	June 29, 2008			July 1, 2007
	(in millions)
Engineering and Development	$	111.3		$	101.7		$	9.6
Percent of Total Revenue		18.1	%		18.7	%

The increase of $9.6 million in engineering and development expenses is due primarily to the acquisition of Nextest as well as increased investment in engineering to enter adjacent markets.

Selling and Administrative

Selling and administrative expenses were as follows:

	For the Six Months Ended						Dollar Change
	June 29, 2008			July 1, 2007
	(in millions)
Selling and Administrative	$	130.7		$	125.1		$	5.6
Percent of Total Revenue		21.2	%		23.1	%

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The increase of $5.6 million from the second quarter of 2007 to the second quarter of 2008 is due to the acquisition of Nextest, which is offset in part by $2.8 million of lower general and administrative expenses and facilities costs, $2.0 million of lower selling and marketing expenses due to reductions in workforce and $1.6 million of lower variable employee compensation.

Restructuring and Other, Net

The tables below represent activity related to restructuring and other, net, in the six months ended June 29, 2008. The accrual for severance payments and employee’ benefits is reflected in accrued employees’ compensation and withholdings and is expected to be paid by the end of the fourth quarter of 2008. The accrual for lease payments on vacated facilities is reflected in other accrued liabilities and other long-term accrued liabilities and is expected to be paid out over the lease terms, the latest of which expires in 2012. We expect to pay out approximately $3.2 million against the lease accruals over the next twelve months. Our future lease commitments are net of expected sublease income of $8.9 million as of June 29, 2008.

2008 Activities

(in thousands)	Gain on Sale of Real Estate			Facility Related			Severance and Benefits			Long-Lived Asset Impairment			Total
Balance at December 31, 2007	$	—		$	—		$	—		$	—		$	—
Charges/ (Credits)		(1,682	)		10,344			12,949			550			22,161
Cash payments		—			(593	)		(8,822	)		—			(9,415	)
Accelerated depreciation and other		1,682			(8,975	)		—			(550	)		(7,843	)
Balance at June 29, 2008	$	—		$	776		$	4,127		$	—		$	4,903

During the six months ended June 29, 2008, we recorded the following restructuring activities:

• $12.9 million of severance charges across all functions and segments related to headcount reductions of 261 people;

• $9.0 million of facility charges across both segments related to the accelerated depreciation of a manufacturing facility in North Reading, MA as a result of the transfer of this activity to an outsourced partner;

• $0.4 million of facility charges across both segments related to the early exit of a facility in Bracknell, UK;

• $0.7 million of facility charges in our Semiconductor Test segment related to the early exit of a facility in Ontario, Canada;

• $1.7 million gain on the sale of real estate in our Semiconductor Test segment for a facility in Agoura Hills, CA; and

• $0.6 million charge in our Semiconductor Test segment for a long-lived asset impairment related to acquired intangible assets.

The restructuring actions taken during the six months ended June 29, 2008, are expected to generate quarterly cost savings of approximately $6.1 million.

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2007 Activities

(in thousands)	Severance and Benefits
Balance at December 31, 2007	$	1,108
Credits		(194	)
Cash payments		(556	)
Balance at June 29, 2008	$	358

Pre-2007 Activities

(in thousands)	Facility Related			Severance and Benefits			Total
Balance at December 31, 2007	$	7,802		$	250		$	8,052
Charges/ (Credits)		2,676			(132	)		2,544
Cash payments		(895	)		(62	)		(957	)
Balance at June 29, 2008	$	9,583		$	56		$	9,639

During the six months ended June 29, 2008, we recorded the following adjustment to our pre-2007 restructuring activities:

• $2.7 million facility related charge in our Systems Test Group segment for changes in the estimated amount and timing of sublease income on a facility in Westford, MA.

In-process Research and Development

On January 24, 2008, we completed our acquisition of Nextest for the total purchase price of $401.6 million. Of the purchase price, $1.1 million has been allocated to in-process research and development and therefore has been immediately charged to the statement of operations.

Interest Income and Expense

Interest income decreased by $11.9 million from $19.4 million in the first six months of 2007 to $7.5 million in the first six months of 2008, due primarily to lower cash balances as a result of the acquisition of Nextest and stock repurchase activity.

Income Taxes

The tax expense of $10.2 million and $4.8 million for the first six months of 2008 and the first six months of 2007 consists of foreign taxes and U.S. Federal tax for 2008 and primarily foreign taxes for 2007. The year to date effective rate of 43% was caused by foreign losses for which no tax benefit was recorded and non deductible intangible asset amortization expense associated with our acquisition of Nextest. As a result of incurring significant operating losses from 2001 through 2003, we determined that it is more likely than not that our deferred tax assets in the U.S. may not be realized, and since the fourth quarter of 2002 we have established a full valuation allowance for our net deferred tax assets. If we generate sustained future taxable income against which these tax attributes may be applied, some portion or all of the valuation allowance would be reversed. If the valuation allowance was reversed, a portion would be recorded as an increase to additional paid in capital, and the remainder would be recorded as a reduction to income tax expense.

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Liquidity and Capital Resources

Our cash, cash equivalents and marketable securities balance decreased $328.6 million in the first six months of 2008, to $414.3 million. Cash and cash equivalents activity for the first six months of 2008 and 2007 were as follows:

	For the Six Months Ended
	June 29, 2008			July 1, 2007
	(in millions)
Cash provided by (used for) operating activities:
Net income from continuing operations, adjusted for non-cash items	$	79.8		$	86.6
Changes in operating assets and liabilities, net of businesses and product lines acquired and sold		1.1			(72.5	)
Cash used for discontinued operations		—			(3.0	)
Total cash provided by operating activities		80.9			11.1
Cash used for investing activities from continuing operations		(275.1	)		(172.4	)
Cash used for investing activities from discontinued operations		—			(0.2	)
Total cash used for investing activities		(275.1	)		(172.6	)
Total cash used for financing activities		(82.1	)		(13.3	)
Decrease in cash and cash equivalents	$	(276.3	)	$	(174.8	)

Changes in operating assets and liabilities, net of product lines and businesses sold and acquired, provided cash of $1.1 million in the first six months of 2008 due primarily to a decrease in accounts receivable of $4.5 million and an increase in accounts payable, deferred revenue and accrued expenses of $10.4 million. Accounts receivable decreased $4.5 million due to a decrease in days sales outstanding from 66 days as of December 31, 2007 to 61 days as of June 29, 2008 as a result of improved collections. These increases in cash were partially offset by an increase in other assets of $6.2 million and retirement plan contributions of $3.7 million. Changes in operating assets and liabilities used cash of $72.5 million in the first six months of 2007 due primarily to an increase in accounts receivable of $55.8 million and a decrease in accrued income taxes of $26.0 million for taxes paid primarily in foreign jurisdictions. Accounts receivable increased $55.8 million, primarily in the Semiconductor Test segment, partially due to increased volume since December 31, 2006 and partially due to an increase in days sales outstanding from 55 days as of December 31, 2006 to 67 days as of July 1, 2007 due to increased shipments in the last month of the period. Inventory decreased $24.3 million in the first six months of 2007 primarily in our Semiconductor Test segment and to a lesser extent in the Systems Test Group segment.

Investing activities consist of purchases, sales and maturities of marketable securities, proceeds from asset disposals, cash paid for assets and purchases of capital assets and businesses. Investing activities used cash of $275.1 million in the first six months of 2008, primarily due to $285.3 million of cash used for the acquisition of Nextest, net of cash acquired.

Financing activities include issuance of our common stock and repurchases of our common stock. During the six months ended June 29, 2008, we repurchased 7.5 million shares of common stock for $91.2 million at an average price of $12.20.

We believe our cash, cash equivalents and marketable securities balance of $414.3 million will be sufficient to meet working capital and expenditure needs for at least the foreseeable future. Inflation has not had a significant long-term impact on earnings.

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Equity Compensation Plans

Discussed in “Note O: Stock Based Compensation” in our 2007 Form 10-K, we have a 1996 Employee Stock Purchase Plan and a 2006 Equity and Cash Compensation Incentive Plan (the “2006 Equity Plan”), a cash and equity compensation incentive plan.

The purpose of the 1996 Employee Stock Purchase Plan is to encourage stock ownership by all eligible employees of Teradyne. The purpose of the 2006 Equity Plan is to provide equity ownership and compensation opportunities in Teradyne to our employees, officers, directors, consultants and/or advisors. Both plans were approved by our shareholders.

Recently Issued Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), “Business Combinations.” (SFAS No. 141(R)) This Statement replaces FASB Statement No. 141, “Business Combinations.” SFAS No. 141(R) establishes new principles and requirements for how an acquiring company 1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree, 2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and 3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is effective for business combinations occurring in the fiscal year beginning on or after December 15, 2008. We are currently evaluating the impact of adopting this standard.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (SFAS No. 161), an amendment of FASB Statement No. 133. “Accounting for Derivative Instruments and Hedging Activities”. SFAS No. 161 expands the current disclosure requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” such that entities must now provide enhanced disclosures on a quarterly basis regarding how and why the entity uses derivatives; how derivatives and related hedged items are accounted for under SFAS No. 133 and how derivatives and related hedged items affect the entity’s financial position, performance and cash flow. SFAS No. 161 is effective prospectively for periods beginning on or after November 15, 2008. We will adopt SFAS No. 161 in fiscal year 2009.

In April 2008, the FASB issued Staff Position No.142-3 (FSP No. 142-3), “Determination of the Useful Life of Intangible Assets”. This FSP amends the guidance in FASB Statement No. 142 ,”Goodwill and Other Intangible Assets”, about estimating useful lives of a recognized intangible assets and requires additional disclosures related to renewing or extending the terms of recognized intangible asset. In estimating the useful life of a recognized intangible asset, the FSP requires companies to consider their historical experience in renewing or extending similar arrangements together with the asset’s intended use, regardless of whether the arrangements have explicit renewal or extension provisions. The FSP is effective for fiscal years beginning after December 15, 2008 and is to be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements are to be applied prospectively to all intangible assets.

Certain Factors That May Affect Future Results

From time to time, information we provide, statements made by our employees or information included in our filings with the SEC (including this Form 10-Q) contain statements that are not purely historical, but are forward looking statements, made under Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which involve risks and uncertainties. In particular, forward looking statements made herein include projections, plans and objectives for our business, financial condition, operating results, future operations, or future economic performance, statements relating to the sufficiency of capital to meet working capital requirements, capital expenditures, including future lease payments and commitments and contributions

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to our pension plan, expectations as to customer orders and demand for our products and statements relating to backlog, bookings and cancellations, gross margins and pricing considerations. These statements are neither promises nor guarantees but involve risks and uncertainties, both known and unknown, which could cause our actual future results to differ materially from those stated in any forward looking statements. Factors that may cause such differences include, but are not limited to the following:

• we are subject to intense competition;

• our business is dependent on the current and anticipated market for electronics, which historically has been highly cyclical;

• our operating results are likely to fluctuate significantly;

• we are subject to risks of operating internationally;

• if we fail to develop new technologies to adapt to our customers’ needs and if our customers fail to accept our new products, our revenues will be adversely affected;

• if our suppliers do not meet product or delivery requirements, we could have reduced revenues and earnings;

• our operations may be adversely impacted if our outsourced service providers fail to perform;

• we may incur higher tax rates than expected;

• we may acquire new businesses or form strategic alliances in the future, and we may not realize the benefits of such acquisitions;

• we have taken measures to ensure that we are prepared to address slowdowns in the market for our products, which could have long-term negative effects on our business or impact our ability to adequately address a rapid increase in customer demand;

• we may incur significant liabilities if we fail to comply with environmental regulations;

• we currently are and in the future may be subject to litigation that could have an adverse effect on our business;

• we have significant guarantees and indemnification obligations;

• if we are unable to protect our intellectual property, we may lose a valuable asset or may incur costly litigation to protect our rights;

• our business may suffer if we are unable to attract and retain key employees;

• our business is impacted by worldwide economic cycles, which are difficult to predict;

• acts of war, terrorist attacks and the threat of domestic and international terrorist attacks may adversely impact our business; and

• provisions of our charter and by-laws and Massachusetts law make a takeover of Teradyne more difficult.

These factors, and others, are discussed from time to time in our filings with the SEC, including our Annual Report on Form 10-K filed with the SEC on February 28, 2008 for the year ended December 31, 2007.

Item 3: Quantitative and Qualitative Disclosures about Market Risk

For “Quantitative and Qualitative Disclosures about Market Risk” affecting Teradyne, see Item 7a. “Quantitative and Qualitative Disclosures About Market Risks,” in our Annual Report on Form 10-K filed with the SEC on February 28, 2008. There were no material changes in our exposure to market risk from those set forth in our Annual Report for the fiscal year ended December 31, 2007.

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Item 4: Controls and Procedures

As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

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PART II. OTHER INFORMATION

Item 1: Legal Proceedings

On September 5, 2001, after our August 2000 acquisition of Herco Technology Corp. and Perception Laminates, Inc., the former owners of those companies filed a complaint against Teradyne and two of our then executive officers in the Federal District Court in San Diego, California, asserting securities fraud and breach of contract related to the acquisition. The District Court dismissed certain of the plaintiffs’ claims, granted partial summary judgment against them with respect to their breach of contract claim and denied their motion for reconsideration. In July 2007, after an appeal by the plaintiffs, the U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the District Court rulings. We petitioned the Ninth Circuit for rehearing of the ruling that it reversed. In October 2007, the Ninth Circuit denied our petition for rehearing. We continue to defend the claim that was sent back to the District Court.

In 2001, we were designated as a Potentially Responsible Party (“PRP”) at a clean-up site in Los Angeles, California. This claim arose out of our acquisition of Perception Laminates in August 2000. Prior to that date, Perception Laminates had itself acquired certain assets of Alco Industries Inc. under an asset purchase agreement in 1992. Neither Teradyne nor Perception Laminates have ever conducted any operations at the Los Angeles site. We have asked the State of California to drop the PRP designation, but California has not yet agreed to do so.

We believe that we have meritorious defenses against the above unsettled claims and intend to vigorously contest them. While it is not possible to predict or determine the outcomes of the unsettled claims or to provide possible ranges of losses that may arise, we believe the potential losses associated with all of these actions will not have a material adverse effect on our consolidated financial position or liquidity, but could possibly be material to our consolidated results of operations of any one period.

In addition, we are subject to legal proceedings, claims and investigations that arise in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. Although there can be no assurance, there are no such matters pending that we expect to be material with respect to our business, financial position or results of operations.

Item 1A: Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A: Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table includes information with respect to repurchases we made of our common stock during the three-month period ended June 29, 2008 (in thousands except per share price):

Period	(a) Total Number of Shares (or units) Purchased(1)	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(1)	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet Be Purchased Under the Plans or Programs(1)
March 31, 2008–April 27, 2008	657	$	12.14	4,439	$	347,617
April 28, 2008–May 25, 2008	616	$	13.61	5,055	$	339,231
May 26, 2008–June 29, 2008	3,399	$	12.32	8,454	$	297,375
	4,672	$	12.46	8,454	$	297,375

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(1) In November 2007, our Board of Directors authorized a stock repurchase program. Under the program, we are permitted to spend an aggregate of $400 million to repurchase shares of our common stock in open market repurchases, in privately negotiated transactions or through other appropriate means. During the three months ended June 29, 2008, we repurchased 4.7 million shares of common stock for $58.2 million at an average price of $12.46. The cumulative repurchases as of June 29, 2008 total 8.5 million shares of common stock for $102.6 million at an average price of $12.14.

Item 4: Submission of Matters to a Vote of Security Holders

(a) Our annual meeting of shareholders was held on May 22, 2008.

(b) The following nominees were elected as directors to serve until the 2009 annual meeting of shareholders:

Nominee	Total Votes “FOR”	Total Votes “AGAINST”	Total Votes “ABSTAINING”
James W. Bagley	157,367,926	1,314,351	1,559,558
Michael A. Bradley	157,391,278	1,292,361	1,558,196
Albert Carnesale	157,339,568	1,346,785	1,555,482
Edwin J. Gillis	157,739,689	975,685	1,526,461
Vincent M. O’Reilly	157,693,775	988,713	1,559,347
Paul J. Tufano	157,653,934	1,028,497	1,559,404
Roy A. Vallee	157,393,410	1,288,640	1,559,785
Patricia S. Wolpert	157,368,315	1,339,022	1,534,498

(c) The other proposals voted upon at the annual meeting were:

1. To approve an amendment to the 2006 Equity and Cash Compensation Incentive Plan to establish a $3 million per fiscal year maximum amount of variable compensation awards that can be received by a participant.

Total Votes For	Total Votes Against	Total Votes Abstaining	Total Broker Non-Votes
149,112,069	9,521,590	1,608,176	0

2. To ratify the selection of PricewaterhouseCoopers LLP as independent auditors for fiscal year ending December 31, 2008.

Total Votes For	Total Votes Against	Total Votes Abstaining	Total Broker Non-Votes
157,719,141	1,155,956	1,366,738	0

Item 6: Exhibits

Exhibit Number	Description
10.1	2006 Equity and Cash Compensation Incentive Plan, as amended * (filed herewith)
31.1	Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2	Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TERADYNE, INC.

Registrant

/s/    GREGORY R. BEECHER        

Gregory R. Beecher

Vice President,

Chief Financial Officer and Treasurer

(Duly Authorized Officer
and Principal Financial Officer)

August 7, 2008

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EX-10.1

Exhibit 10.1

TERADYNE, INC.

2006 EQUITY AND CASH COMPENSATION INCENTIVE PLAN

(as amended through May 22, 2008)

1. Purpose and Eligibility.

The purpose of this 2006 Equity and Cash Compensation Incentive Plan (the “Plan”) of Teradyne, Inc. is to provide equity ownership and compensation opportunities in the Company (each an “Award”) to employees, officers, directors, consultants and advisors of the Company and its Subsidiaries, all of whom are eligible to receive Awards under the Plan. Any person to whom an Award has been granted under the Plan is called a “Participant.” Additional definitions are contained in Section 14(a).

2. Administration.

a. Administration by Committee of Independent Members of the Board of Directors. The Plan will be administered by a committee (the “Committee”) composed solely of members of the Board of Directors of the Company that are “independent,” as defined pursuant to Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended, and as proscribed under Rule 303A.02 of the New York Stock Exchange (“NYSE”) Listed Company Manual, or any amendment, supplement or modification thereto; provided, however, that at any time and on any one or more occasions the Board may itself exercise any of the powers and responsibilities assigned the Committee under the Plan and when so acting shall have the benefit of all of the provisions of the Plan pertaining to the Committee’s exercise of its authorities hereunder. The Committee, in its sole discretion, shall have the authority to grant Awards, to adopt, amend and repeal rules relating to the Plan, to interpret and correct the provisions of the Plan and any Award, and, subject to the limitations of the Plan, to modify and amend any Award. All decisions by the Committee shall be final and binding on all interested persons. Neither the Company nor any member of the Committee shall be liable for any action or determination relating to the Plan.

b. Delegation to Executive Officers. To the extent permitted by applicable law, the Committee may delegate to one or more executive officers of the Company the power to grant Awards and exercise such other powers under the Plan as the Committee may determine; provided, however, that the Committee shall fix the maximum number of Awards to be granted and the maximum number of shares issuable to any one Participant pursuant to Awards granted by such executive officer or officers. The Committee may, by a resolution adopted by the Committee, authorize one or more executive officers of the Company to do one or both of the following: (i) designate employees of the Company or of any of its subsidiaries to be recipients of Awards and (ii) determine the number, type and terms of such Awards to be received by such employees, subject to the limitations of the Plan; provided, however, that, in each case, the resolution so authorizing such officer or officers shall specify the maximum number and type of Awards such officer or officers may so award. The Committee may not authorize an officer to designate himself or herself as a recipient of any such Awards or to grant Awards to other executive officers of the Company.

3. Stock Available for Awards.

a. Number of Shares. Subject to adjustment under Section 3(c), the aggregate number of shares (the “Authorized Shares”) of the Company’s common stock, $0.125 par value per share (the “Common Stock”), that may be issued pursuant to the Plan shall be 12,000,000 shares of Common Stock. If any Award expires, is terminated, surrendered, forfeited, expires unexercised, is settled in cash in lieu of Common Stock or is exchanged for other Awards, in whole or in part, the unissued Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares. Notwithstanding anything to the contrary in this Plan, the foregoing limitations shall be subject to adjustment under Section 3(c), but only to the extent that such adjustment will not affect the status of any Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

b. Per-Participant Limit. Subject to adjustment under Section 3(c), no Participant may be granted stock-based Awards during any one fiscal year to purchase more than 2,000,000 shares of Common Stock.

c. Adjustment to Common Stock. In the event of any stock split, stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off, split-up, or other similar change in capitalization or event, (i) the number and class of securities available for Awards under the Plan and the per-Participant share limit, (ii) the number and class of securities, vesting schedule and exercise price per share subject to each outstanding stock-based Award, (iii) the repurchase price per security subject to repurchase, and (iv) the terms of each other outstanding stock-based Award shall be adjusted by the Company (or substituted Awards may be made) to the extent the Committee shall determine, in good faith, that such an adjustment (or substitution) is appropriate. If Section 11(f)(i) applies for any event, this Section 3(c) shall not be applicable.

d. Fractional Shares. No fractional shares shall be issued under the Plan and the Participant shall, at the Committee’s discretion, receive either cash in lieu of such fractional shares or a full share for each fractional share.

4. Stock Options.

a. General. The Committee may grant options to purchase Common Stock (each, an “Option”) and determine the terms and conditions of each Option, including, but not limited to (i) the number of shares subject to such Option or a formula for determining such, (ii) subject to Section 4(e) hereof, the exercise price of the Options and the means of payment for the shares, (iii) the Performance Criteria (as defined in Section 11(d)), if any, and level of achievement of such Performance Criteria that shall determine the number of shares or Options granted, issued, retainable and/or vested, (iv) the terms and conditions of the grant, issuance and/or forfeiture of the shares or Options, and (v) such further terms and conditions as may be determined from time to time by the Committee, in each case not inconsistent with this Plan.

b. Incentive Stock Options. An Option that the Committee intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall be granted only to employees of the Company and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Committee and the Company shall have no liability if an Option or any part thereof that is intended to be an Incentive Stock Option does not qualify as such.

c. Nonstatutory Stock Options. An Option or any part thereof that does not qualify as an Incentive Stock Option is referred to herein as a “Nonstatutory Stock Option.”

d. Dollar Limitation. For so long as the Code shall so provide, Options granted to any employee under the Plan (and any other plans of the Company) which are intended to constitute Incentive Stock Options shall not constitute Incentive Stock Options to the extent that such Options, in the aggregate, become exercisable for the first time in any one calendar year for shares of Common Stock with an aggregate Fair Market Value (as defined in Section 14 and determined as of the respective date or dates of grant) of more than $100,000 (or such other limit as may be provided by the Code). To the extent that any such Incentive Stock Options exceed the $100,000 limitation (or such other limit as may be provided by the Code), such Options shall be Nonstatutory Stock Options.

e. Exercise Price. The Committee shall establish the exercise price (or determine the method by which the exercise price shall be established) at the time each Option is granted and specify the exercise price in the applicable Option agreement, provided, that the exercise price per share specified in the agreement relating to each Option granted under the Plan shall not be less than the Fair Market Value per share of Common Stock on the date of such grant. In the case of an Incentive Stock Option to be granted to an employee owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, the price per share specified in the agreement relating to such Incentive Stock Option shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the date of grant

(or such other limit as may be provided by the Code). For purposes of determining stock ownership under this subsection, the rules of Section 424(d) of the Code shall apply. Subject to Section 3(c), an Option may not be amended subsequent to its issuance to reduce the price at which it is exercisable unless such amendment is approved by the Company’s shareholders.

f. Duration of Options. Each Option shall be exercisable at such times and subject to such terms, conditions and expiration as the Committee may specify in the applicable Option agreement; provided, that no Option shall be exercisable for a period of time greater than ten (10) years from the date of grant of such Option; provided, further, that Incentive Stock Options granted to an employee owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company shall be exercisable for a maximum of five (5) years from the date of grant of such Option (or such other limit as may be provided by the Code). For purposes of determining stock ownership under this subsection, the rules of Section 424(d) of the Code shall apply.

g. Vesting of Options. Subject to Section 11(f) and Section 11(j) and except as provided in Section 13, at the time of the grant of an Option, the Committee shall establish a vesting date or vesting dates with respect to the shares of Common Stock covered by such Options. The Committee may establish vesting dates based upon the passage of time and/or the satisfaction of Performance Criteria or other conditions as deemed appropriate by the Committee.

h. Exercise of Option. Options may be exercised only by delivery to the Company at its principal office address or to such transfer agent as the Company shall designate of a written notice of exercise specifying the number of shares as to which such Option is being exercised, signed by the proper person, or by notification of the Company-designated third party commercial provider (the “Third Party Commercial Provider”), in accordance with the procedures approved by the Company and to which the holder of the Option shall have ongoing access by means of accessing such person’s account maintained with the Third Party Commercial Provider, together with payment in full as specified in Section 4(i) for the number of shares for which the Option is exercised.

i. Payment Upon Exercise. Common Stock purchased upon the exercise of an Option shall be paid for by one or any combination of the following forms of payment:

(i) in United States dollars in cash or by check payable to order of the Company or by fund transfer from the Option holder’s account maintained with the Third Party Commercial Provider;

(ii) at the discretion of the Committee, through delivery of shares of Common Stock having a Fair Market Value equal as of the date of the exercise to the cash exercise price of the Option, provided, that such shares were not acquired by the Participant in the prior six months;

(iii) at the discretion of the Committee and consistent with applicable law, through the delivery of an assignment to the Company of a sufficient amount of the proceeds from the sale of the Common Stock acquired upon exercise of the Option and an authorization to the Third Party Commercial Provider to pay that amount to the Company, which sale shall be at the Participant’s direction at the time of exercise; or

(iv) at the discretion of the Committee, by any combination of (i), (ii), or (iii) above.

If the Committee exercises its discretion to permit payment of the exercise price of an Incentive Stock Option by means of the methods set forth in clauses (ii), (iii) or (iv) of the preceding sentence, such discretion shall be exercised in writing in the instrument evidencing the Award of the Incentive Stock Option.

j. Notice to Company of Disqualifying Disposition. By accepting an Incentive Stock Option granted under the Plan, each optionee agrees to notify the Company in writing immediately after such optionee makes a disqualifying disposition of any stock acquired pursuant to the exercise of the Incentive Stock Options. A “disqualifying disposition” is generally any disposition occurring on or before the later of (a) the date two years following the date the Incentive Stock Option was granted or (b) the date one year following the date the Incentive Stock Option was exercised.

k. Issuances of Securities. Except as provided in Section 3(c) or as otherwise expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company.

5. Stock Appreciation Rights

a. General. A Stock Appreciation Right (a “SAR”) is an Award entitling the holder, upon exercise, to receive an amount in cash or Common Stock, or a combination thereof (such form to be determined by the Committee), determined solely by reference to appreciation, from and after the date of grant, in the Fair Market Value of a share of Common Stock. The date as of which such appreciation or other measure is determined shall be the exercise date of the SAR Award.

b. Grants. SARs may be granted in tandem with, or independently of, Options granted under the Plan.

(1) Tandem Awards. When SARs are expressly granted in tandem with Options: (i) the SARs will be exercisable only at such time or times, and to the extent, that the related Option is exercisable, and will be exercisable in accordance with the procedure required for exercise of the related Option; (ii) the SARs will terminate and no longer be exercisable upon the termination or exercise of the related Option, except that a SAR granted with respect to less than the full number of shares covered by an Option will not be terminated until and only to the extent that the number of shares as to which the related Option has been exercised or has terminated exceeds the number of shares not covered by the SAR; (iii) the Option will terminate and no longer be exercisable upon the exercise of the related SAR; and (iv) the SAR will be transferable only with the related Option.

(2) Independent Stock Appreciation Rights. A SAR not expressly granted in tandem with an Option will become exercisable at such time or times, and on such conditions, as the Committee may specify in the SAR Award.

c. Terms and Conditions. The Committee shall determine all terms and conditions of a SAR Award, including, but not limited to (i) the number of shares subject to such SAR Award or a formula for determining such, (ii) the Performance Criteria, if any, and level of achievement of such Performance Criteria that shall determine the number of shares granted, issued, retainable and/or vested or the amount of cash payable, (iii) the terms and conditions on the grant, issuance and/or forfeiture of the shares, and (iv) such further terms and conditions as may be determined from time to time by the Committee, in each case not inconsistent with this Plan.

d. Vesting of SAR Awards. Subject to Section 11(f) and Section 11(j), at the time of the grant of a SAR Award, the Committee shall establish a vesting date or vesting dates with respect to such SAR Award, provided that SARs awarded in tandem with Options shall be subject to the same vesting date or vesting dates established by the Committee pursuant to Section 4(g) for such related Options and shall be exercisable only to the extent that such related Option shall then be exercisable. The Committee may establish vesting dates based upon the passage of time and/or the satisfaction of Performance Criteria or other conditions as deemed appropriate by the Committee.

6. Restricted Stock.

a. Grants. The Committee may grant Awards entitling recipients to acquire shares of Common Stock, subject to (i) delivery to the Company by the Participant of cash, a check or other sufficient legal consideration in an amount at least equal to the par value of the shares purchased, (ii) the right of the Company to repurchase or reacquire all or part of such shares at their issue price or other stated or formula price from the Participant in the event that conditions specified by the Committee in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Committee for such Award (each, a “Restricted Stock Award”), and (iii) Section 6(b).

b. Terms and Conditions. A Participant that is the holder of a Restricted Stock Award, whether vested or unvested, shall be entitled to enjoy all shareholder rights with respect to the shares of Common Stock underlying such Restricted Stock Award, including the right to receive dividends and vote such shares. Subject to Section 6(c), the Committee shall determine all terms and conditions of any such Restricted Stock Award, including, but not limited to (i) the number of shares subject to such Restricted Stock Award or a formula for determining such, (ii) the purchase price of the shares, if any, and the means of payment for the shares, (iii) the Performance Criteria, if any, and level of achievement of such Performance Criteria that shall determine the number of shares granted, issued, retainable and/or vested, (iv) the terms and conditions on the grant, issuance and/or forfeiture of the shares, and (v) such further terms and conditions as may be determined from time to time by the Committee, in each case not inconsistent with this Plan. At the Committee’s election, shares of Common Stock issued in respect of a Restricted Stock Award may be (i) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapses, or (ii) evidenced by a stock certificate that may bear a legend indicating that the ownership of the shares of Common Stock represented by such certificate is subject to the restrictions, terms and conditions of this Plan and the Restricted Stock Award. Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant. All certificates registered in the name of the Participant shall, unless otherwise determined by the Committee, be deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). After the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or, if the Participant has died, to the beneficiary designated by the Participant, in a manner determined by the Committee, to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant’s estate.

c. Vesting of Restricted Stock. Subject to Section 11(f) and Section 11(j), at the time of the grant of a Restricted Stock Award, the Committee shall establish a vesting date or vesting dates with respect to the shares of Common Stock covered by such Restricted Stock Award, which vesting dates may be based upon the passage of time and/or the satisfaction of Performance Criteria or other conditions as deemed appropriate by the Committee; provided, that all Restricted Stock Awards, other than Awards granted under Section 11(l), shall have a minimum vesting period of no less than one (1) year for Restricted Stock Awards granted subject to Performance Criteria and no less than three (3) years for all other Restricted Stock Awards.

7. Restricted Stock Unit.

a. Grants. The Committee may grant Awards entitling recipients to acquire shares of Common Stock in the future, with the future delivery of the Common Stock subject to a risk of forfeiture or other restrictions that will lapse upon the satisfaction of one or more specified conditions (each, a “Restricted Stock Unit”).

b. Terms and Conditions. Subject to Section 7(c), the Committee shall determine all terms and conditions of any such Restricted Stock Unit, including, but not limited to (i) the number of shares subject to such Restricted Stock Unit or a formula for determining such, (ii) the purchase price of the shares, if any, and the means of payment for the shares, (iii) the Performance Criteria, if any, and level of achievement of such Performance Criteria that shall determine the number of shares granted, issued, retainable and/or vested, (iv) the terms and conditions on the grant, issuance and/or forfeiture of the shares, and (v) such further terms and conditions as may be determined from time to time by the Committee, in each case not inconsistent with this Plan. A Participant may not vote the shares represented by a Restricted Stock Unit. A Restricted Stock Unit may be settled in cash or Common Stock, as determined by the Committee, with the amount of the cash payment based on the Fair Market Value of the shares of Common Stock at the time of vesting. Any such settlements may be subject to such conditions, restrictions and contingencies as the Committee shall establish.

c. Vesting of Restricted Stock Unit. Subject to Section 11(f) and Section 11(j), at the time of the grant of a Restricted Stock Unit, the Committee shall establish a vesting date or vesting dates with respect to the shares of Common Stock covered by such Restricted Stock Unit, which vesting dates may be based upon the passage of time and/or the satisfaction of Performance Criteria or other conditions as deemed appropriate by the Committee; provided, that all Awards of Restricted Stock Units, other than Awards granted under Section 11(l), shall have a

minimum vesting period of no less than one (1) year for Restricted Stock Units granted subject to Performance Criteria and no less than three (3) years for all other Restricted Stock Units.

8. Phantom Stock.

a. General. The Committee may grant Awards entitling recipients to receive, in cash or shares, the Fair Market Value of shares of Common Stock (“Phantom Stock”) upon the satisfaction of one or more specified conditions.

b. Terms and Conditions. Subject to Section 8(c), the Committee shall determine the terms and conditions of a Phantom Stock Award, including, but not limited to (i) the number of shares subject to or represented by such Phantom Stock Award or a formula for determining such, (ii) the purchase price of the shares, if any, and the means of payment for the shares, (iii) the Performance Criteria, if any, and level of achievement of such Performance Criteria that shall determine the number of shares granted, issued, retainable and/or vested or the amount of cash payable, (iv) the terms and conditions on the grant, issuance and/or forfeiture of the shares or Phantom Stock Award, and (v) such further terms and conditions as may be determined from time to time by the Committee, in each case not inconsistent with this Plan. A Participant may not vote the shares represented by a Phantom Stock Award. Any settlements of Phantom Stock Awards may be subject to such conditions, restrictions and contingencies as the Committee shall establish.

c. Vesting of Phantom Stock. Subject to Section 11(f) and Section 11(j), at the time of the grant of a Phantom Stock Award, the Committee shall establish a vesting date or vesting dates with respect to such Phantom Stock Award. The Committee may establish vesting dates based upon the passage of time and/or the satisfaction of Performance Criteria or other conditions as deemed appropriate by the Committee.

9. Other Stock-Based Awards.

The Committee shall have the right to grant other Awards based upon the Common Stock and having such terms and conditions as the Committee may determine, including, without limitation, the grant of shares based upon certain conditions and/or Performance Criteria, the grant of securities convertible into Common Stock and the grant of stock units. The Committee shall determine the terms and conditions of any such Awards, including, but not limited to (i) the number of shares subject to such Award or a formula for determining such, (ii) the purchase price of the shares, if any, and the means of payment for the shares, (iii) the Performance Criteria, if any, and level of achievement of such Performance Criteria that shall determine the number of shares granted, issued, retainable and/or vested, (iv) the terms and conditions on the grant, issuance and/or forfeiture of the shares or Award, and (v) such further terms and conditions as may be determined from time to time by the Committee, in each case not inconsistent with this Plan. Subject to Section 11(f) and Section 11(j), at the time of the grant of an Award under this Section 9, the Committee shall establish a vesting date or vesting dates with respect to such Award, which vesting date may be based upon the passage of time and/or the satisfaction of Performance Criteria or other conditions as deemed appropriate by the Committee; provided, that all Full Value Awards granted under this Section 9, other than Full Value Awards granted under Section 11(l) herein, shall have a minimum vesting period of no less than one (1) year for Full Value Awards subject to Performance Criteria and no less than three (3) years for all other Full Value Awards granted hereunder.

10. Cash Awards.

a. Grants. The Committee may grant cash awards (each, a “Cash Award”), either alone, in addition to, or in tandem with other Awards granted under the Plan.

b. Terms and Conditions. The Committee shall determine the terms and conditions of any such Cash Award. From time to time, the Committee shall establish administrative rules and procedures governing the administration of Cash Awards.

c. Variable Compensation Awards. A Cash Award that the Committee intends to be a “Variable Compensation Award” subject to Section 162(m) of the Code, provides a variable compensation payment each year to the Company’s executive officers and certain eligible senior employees each year based on certain Performance Criteria that may include, among other criteria, overall corporate and/or individual business group’s or division’s performance during the prior fiscal year, as determined by the Committee. Variable Compensation Awards are calculated based on a percentage of the Participant’s base annual salary (“Variable Compensation Factor”) and start at 5% for new Participants. Variable Compensation Factors are reviewed annually and typically do not exceed 100%. A newly hired executive officer or employee, who is approved for eligibility for Variable Compensation Awards, will be eligible to receive a Variable Compensation Award for their first year of employment, pro-rated from the date of hire. The Committee may rely upon the recommendation of the Company’s senior management in granting Variable Compensation Awards to eligible Participants who do not constitute executive officers of the Company, including as to the amount and terms of any such Awards and the satisfaction of Performance Criteria. No Participant may be granted Variable Compensation Awards that would result in a payment of more than $3 million during any one fiscal year.

11. General Provisions Applicable to Awards.

a. Transferability of Awards. Except as the Committee may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant, provided, however, that Nonstatutory Stock Options may be transferred to a grantor-retained annuity trust or a similar estate-planning vehicle in which the trust is bound by all provisions of the Option which are applicable to the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees of such an Option.

b. Documentation. Each Award granted under the Plan, with the exception of Cash Awards, shall be evidenced by a written Award agreement in such form as the Committee shall from time to time approve. Award agreements shall comply with the terms and conditions of the Plan and may contain such other provisions not inconsistent with the terms and conditions of the Plan as the Committee shall deem advisable. In the case of an Incentive Stock Option, the Award agreement shall contain, or refer to, such provisions relating to exercise and other matters as are required of “incentive stock options” under the Code. Award agreements may be evidenced by an electronic transmission (including an e-mail or reference to a website or other URL) sent to the Participant through the Company’s normal process for communicating electronically with its employees. As a condition to receiving an Award, the Committee may require the Participant to affirmatively accept the Award and agree to the terms and conditions set forth in the Award agreement by physically and/or electronically executing the Award agreement or by otherwise physically and/or electronically acknowledging such acceptance and agreement. With or without such affirmative acceptance, however, the Committee may prescribe conditions (including the exercise or attempted exercise of any benefit conferred by the Award) under which the proposed Participant may be deemed to have accepted the Award and agreed to the terms and conditions set forth in the Award agreement.

c. Committee Discretion. The terms of each type of Award need not be identical, and the Committee need not treat Participants uniformly.

d. Performance Criteria. For purposes of this Plan, the term “Performance Criteria” shall mean any one or more of the following performance criteria, applied to either the Company as a whole or to a division, business unit or Subsidiary, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee in the Award: cash flow; earnings per share; earnings before interest, taxes and amortization; return on equity; total shareholder return; share price performance; return on capital; return on assets or net assets; revenue; income or net income; operating income or net operating income; operating profit or net operating profit; operating margin or profit margin; return on operating revenue; return on invested capital; market segment share; product release schedules; new product innovation; product cost reduction; brand

recognition/acceptance; product ship targets; process improvement results; verification of business strategy and/or business plan; improvement of strategic position; adaptation to changes in the marketplace or environment; or customer satisfaction. If the Award so provides, the Committee may appropriately evaluate achievement against Performance Criteria to take into account any of the following events that occurs during a performance period: asset write-downs; litigation or claim judgments or settlements; the effect of changes in tax law; accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs and any extraordinary non-recurring charges or other events. The Committee may prescribe the foregoing criteria either individually or in combination. The Committee’s determination of the achievement of any Performance Criteria shall be conclusive. The minimum vesting period for all Full Value Awards granting shares of Common Stock subject to Performance Criteria, other than Full Value Awards granted under Section 11(l) herein, shall be no less than one (1) year.

e. Termination of Status. Except as otherwise specified herein, the Committee shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award under such circumstances, subject to applicable law and the provisions of the Code.

f. Acquisition or Liquidation of the Company.

(i) Consequences of an Acquisition. If the Company is to be consolidated with or acquired by another entity in a merger or other reorganization in which the holders of the outstanding voting stock of the Company immediately preceding the consummation of such event shall, immediately following such event, hold, as a group, less than a majority of the voting securities of the surviving or successor entity, or in the event of a sale of all or substantially all of the Company’s assets or otherwise (each, an “Acquisition”), the Committee or the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Committee”), shall, as to outstanding Awards, either (A) make appropriate provision for the continuation of such Awards by substituting on an equitable basis for the shares then subject to such Awards either (1) the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition, (2) shares of stock of the surviving or successor corporation or (3) such other securities as the Committee or the Successor Committee deems appropriate, the Fair Market Value of which shall not materially exceed the Fair Market Value of the shares of Common Stock subject to such Awards immediately preceding the Acquisition; or (B) upon written notice to the Participants, provide that all Awards must be exercised, to the extent then exercisable or to be exercisable as a result of the Acquisition, within a specified number of days of the date of such notice, at the end of which period the Awards shall terminate; or (C) terminate all Awards in exchange for a cash payment equal to the excess, if any, of the Fair Market Value of the shares subject to such Awards (to the extent then exercisable or to be exercisable as a result of the Acquisition) over the exercise price thereof, if any; or (D) in the case of Awards that may be settled in whole or in part in cash, provide for equitable treatment of such Awards.

(ii) Substitution of Awards Upon Certain Events. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Committee may grant Awards under the Plan in substitution for stock and stock-based awards issued by such entity or an affiliate thereof. The substitute Awards shall be granted on such terms and conditions as the Committee considers appropriate in the circumstances.

(iii) Liquidation or Dissolution. In the event of the proposed liquidation or dissolution of the Company, each Award, except for Cash Awards already earned, to the extent not then exercised or vested, will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee.

g. Withholding. Each Participant shall pay to the Company, or make provisions satisfactory to the Company for payment, of any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax withholding obligation. The Committee may allow Participants to satisfy such tax withholding obligations in whole or in part by transferring shares of Common Stock, including

shares retained from the Award creating the tax obligation, valued at their Fair Market Value. The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.

h. Amendment of Awards. The Committee may amend, modify or terminate any outstanding Award including, but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, the vesting provisions (subject to the minimum vesting requirements set forth herein), Performance Criteria, or level of achievement of Performance Criteria, and converting an Incentive Stock Option to a Nonstatutory Stock Option; provided that, except as otherwise provided in Section 11(f)(i), the Participant’s consent to such action shall be required unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant; provided, further, that subject to Section 3(c), an Option may not be amended subsequent to its issuance either to reduce the price at which such previously issued Option is exercisable or to extend the period of time for which such previously-issued Option shall be exercisable beyond ten (10) years unless such amendment is approved by the Company’s shareholders. Furthermore, no Option shall be canceled and replaced with Options having a lower exercise price unless such cancellation and exchange is approved by the Company’s shareholders.

i. Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations, and (iv) the Participant has paid to the Company, or made provisions satisfactory to the Company for payment of, any taxes required by law to be withheld in connection with the Award.

j. Acceleration. The Committee may at any time provide (i) that any Option shall become immediately exercisable in full or in part, (ii) that Awards that may be settled in whole or in part in cash may become immediately exercisable in full or in part, and (iii) in connection with the disability, death or retirement of a Participant or in connection with an event contemplated by Section 11(f)(i), (A) that any Restricted Stock Award or Restricted Stock Unit shall become exercisable in full or in part or shall be free of some or all restrictions or the risk of forfeiture or (B) that any other Full Value Award shall become exercisable in full or in part or free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be. The Committee may take the actions contemplated by the preceding sentence despite the fact that such actions may (x) cause the application of Sections 280G and 4999 of the Code if an event contemplated by Section 11(f)(i) occurs, or (y) disqualify all or part of an Option as an Incentive Stock Option. In the event of the acceleration of the exercisability of one or more outstanding Options, including pursuant to Section 11(f)(i), the Committee may provide, as a condition of accelerated exercisability of any or all such Options, that the Common Stock or other substituted consideration, including cash, as to which exercisability has been accelerated shall be restricted and subject to forfeiture back to the Company at the election of the Company at the cost thereof upon termination of employment or other relationship, with the timing and other terms of the vesting of such restricted Common Stock or other consideration being not less favorable to the Participant than the timing and other terms of the superseded vesting schedule of the related Option.

k. Option or SAR Award Exchange. The Committee may, from time to time, upon obtaining shareholder approval therefor, undertake an exchange program under which employees deemed eligible by the Committee may elect to surrender for cancellation then existing Awards under the Plan or outstanding, unexercised options previously granted under the Company’s 1991 Employee Stock Option Plan, 1997 Employee Stock Option Plan and 1996 Non-Employee Director Stock Option Plan, that have, at the time, an exercise price at or above a level determined by the Board of Directors or the Committee in exchange for cash and/or another Award under the Plan, the form of such consideration to be determined by the Committee.

l. Exception to Minimum Vesting Periods. The Committee may grant up to 5% of the maximum, aggregate shares of Common Stock authorized for issuance hereunder in the form of Restricted Stock Awards, Restricted Stock Units and other Awards based upon Common Stock that do not comply with the minimum vesting periods set forth in Sections 6(c), 7(c), 9 and 13.

m. Compliance with Section 409A. Any other provision of the Plan or any Award to the contrary notwithstanding, the Plan and every Award hereunder shall be construed, administered and enforced as necessary to comply with applicable requirements of Section 409A of the Code and the Treasury and IRS rulings and regulations issued thereunder, so that no Participant shall (without such Participant’s express written consent) incur any of the additional tax or interest liabilities of Section 409A(a)(B) of the Code with respect to any Award. The Plan and each Award are hereby modified and limited as necessary to comply with applicable requirements of Section 409A.

12. Foreign Jurisdictions.

To the extent that the Committee determines that the material terms set by the Committee or imposed by the Plan preclude the achievement of the material purposes of the Plan in jurisdictions outside the United States, the Committee will have the authority and discretion to modify those terms and provide for such other terms and conditions as the Committee determines to be necessary, appropriate or desirable to accommodate differences in local law, policy or custom or to facilitate administration of the Plan. The Committee may adopt or approve sub-plans, appendices or supplements to, or amendments, restatements or alternative versions of, the Plan as it may consider necessary, appropriate or desirable for such purpose, without thereby affecting the terms of the Plan as in effect for any other purpose. The special terms and any appendices, supplements, amendments, restatements or alternative versions, however, shall not include any provisions that are inconsistent with the terms of the Plan as then in effect, unless the Plan could have been amended to eliminate such inconsistency without further approval by the shareholders. The Committee shall also have the authority and discretion to delegate the foregoing powers to appropriate officers of the Company.

13. Grant of Awards to Non-Employee Directors.

Each person who is a member of the Board of Directors and who is not an employee of the Company (each, a “Non-Employee Director”) shall be automatically granted Awards having a Fair Market Value or exerciseable for shares having a Fair Market Value, as the case may be, on the day of such grant as follows:

a. on the date such Non-Employee Director is first elected to the Board of Directors equal to the value of the Automatic Annual Grant, as prorated daily to reflect the period between the directors date of election and the date of the next Automatic Annual Grant; and

b. on the first Monday in February in each year, equal to $110,000 (“Automatic Annual Grant”).

Awards granted under this Section 13 may be any of the following: Restricted Stock Units, Restricted Stock, Nonstatutory Stock Options, SARs, or cash, or a combination of the foregoing. Awards granted under the Plan shall be in addition to the annual Board and Committee cash retainers paid by the Company to the Non-Employee Directors. The type of Awards granted under this Section 13 shall be determined, in each instance, at the Committee’s discretion (subject to the foregoing limitations). The number of shares, if any, covered by Awards granted under this Section 13 shall be subject to adjustment in accordance with the provisions of Section 3(c) of this Plan. Subject to Section 11(f) and Section 11(j), an Award of Restricted Stock or Restricted Stock Units granted pursuant to this Section 13 shall have a minimum vesting period of no less than one (1) year for Restricted Stock or Restricted Stock Units granted subject to Performance Criteria and no less than three (3) years for all other Restricted Stock or Restricted Stock Units granted, unless such Award is granted under Section 11(l), and shall expire on the date which is ten (10) years after the date of grant of such Award. Any Options, SARs or other cash Awards granted pursuant to this Section 13 may, at the Committee’s discretion, be immediately exercisable in their entirety on the date of grant.

14. Miscellaneous.

a. Definitions.

(i) “Company” for purposes of eligibility under the Plan, shall include Teradyne, Inc. and any present or future subsidiary corporations of Teradyne, Inc., as defined in Section 424(f) of the Code (a “Subsidiary”), and any present or future parent corporation of Teradyne, Inc., as defined in Section 424(e) of the Code. For purposes of Awards other than Incentive Stock Options, the term “Company” shall include any other entity in which the Company has a direct or indirect significant interest, as determined by the Committee in its sole discretion.

(ii) “Code” means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder.

(iii) “Employee” for purposes of eligibility under the Plan shall include a person to whom an offer of employment has been extended by the Company and who has actually commenced employment with the Company, whether full or part-time status.

(iv) “Fair Market Value” of the Company’s Common Stock on any date means (i) the closing price (on that date) of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the average of the closing bid and asked prices last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not then traded on a national securities exchange; or (iii) if the Common Stock is not publicly traded, the fair market value of the Common Stock as determined by the Committee after taking into consideration all factors which it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm’s length; provided, that, in all events the Fair Market Value shall represent the Committee’s good faith determination of the fair market value of the Common Stock. The Committee’s determination shall be conclusive as to the Fair Market Value of the Common Stock.

(v) “Full Value Awards” means Restricted Stock, Restricted Stock Units and Awards other than (a) Options or (b) SARs or (c) Cash Awards or (d) other stock-based Awards for which the Participant pays the intrinsic value (whether directly or by forgoing a right to receive a cash payment from the Company).

b. Legal Consideration for Issuance of Shares. Unless otherwise determined by the Committee, in the case of Awards of Restricted Stock, Restricted Stock Units, or Awards that are settled in whole or in part with shares of Common Stock, to the extent such Awards do not otherwise require the payment by the Participant of cash consideration that exceeds the par value of the shares of Common Stock received in connection therewith, the services rendered or to be rendered by the Participant shall satisfy the legal requirement of payment of par value for such shares of Common Stock.

c. No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan.

d. No Rights As Shareholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a shareholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder thereof.

e. Effective Date and Term of Plan. The Plan shall become effective on the date on which it is approved by the shareholders of the Company (the “Effective Date”). No Awards shall be granted under the Plan after the completion of ten (10) years from the Effective Date, but Awards previously granted may extend beyond that date.

f. Amendment of Plan. The Committee may amend this Plan at any time, provided that any material amendment to the Plan will not be effective unless approved by the Company’s shareholders. For this purpose, a material amendment is any amendment that would (i) other than pursuant to Section 3(c), materially increase either the aggregate number of shares of Common Stock available for issuance under the Plan; or the maximum number of shares of Common Stock issuable in one fiscal year to a Participant; (ii) expand or limit the class of persons eligible to receive Awards or otherwise participate in the Plan; (iii) subject to Section 3(c), reduce the price at which a previously-issued Option is exercisable or extend the period of time for which a previously-issued Option shall be exercisable beyond ten (10) years; (iv) subject to Section 11(f) and Section 11(j), amend the minimum vesting provisions of Full Value Awards; or (v) require shareholder approval pursuant to the requirements of the NYSE and/or any other exchange on which the Company is then listed or pursuant to applicable law.

g. Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of The Commonwealth of Massachusetts, exclusive of reference to rules and principles of conflicts of law.

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Michael A. Bradley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Teradyne, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2008
By:	/s/    MICHAEL A. BRADLEY
	Michael A. Bradley Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Gregory R. Beecher, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Teradyne, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2008
By:	/s/    GREGORY R. BEECHER
	Gregory R. Beecher Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Teradyne, Inc. (the “Company”) on Form 10-Q for the period ending June 29, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Bradley, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C (S)1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/s/    MICHAEL A. BRADLEY        

Michael A. Bradley

Chief Executive Officer

August 7, 2008

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Teradyne, Inc. (the “Company”) on Form 10-Q for the period ending June 29, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory R. Beecher, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C (S)1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/s/    GREGORY R. BEECHER        

Gregory R. Beecher

Chief Financial Officer and Treasurer

August 7, 2008