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News Release
July 22, 1998

ZYGO IMPLEMENTS MAJOR COST CONTAINMENT EFFORTS

MIDDLEFIELD, CONNECTICUT (July 22, 1998)......Zygo Corporation (NASDAQ:ZIGO) today announced a comprehensive set of cost reduction and cost containment measures to more closely align expense levels to revenues, which are expected to be approximately $98 million for the fiscal year which ended June 30, 1998. Among the actions being implemented immediately are staff reductions approaching 10 percent of the workforce, a wage and salary freeze, and a reduction in all discretionary spending areas. Commenting on these actions, President and CEO, Gary Willis, stated, "For the last few quarters, we have experienced a softening of demand for our goods and services in the major market segments we serve, primarily semiconductor and data storage and our book-to-bill ratio has been well below 1 to 1. As recent reports from a number of industry experts reflect, these lowered demand levels, coupled with industrywide overcapacity, are expected to continue on a protracted basis throughout the rest of this calendar year. Further, it is very difficult to predict when the present environment will change and increased demand will be seen. With that in mind, it was prudent for us to more closely align our cost and expense levels to these reduced demand levels. We have, however, and will continue to make the necessary worldwide customer support infrastructure and technology and product development investments required to strengthen our ability to serve our worldwide customer base and ensure our leading edge and superior product competitive position. In this way, we believe we will optimize both our short-term performance and our longer-term ability to capture market share and generate increased levels of revenue and financial performance."

The Company also announced that it would be taking a number of one-time charges against its fourth quarter fiscal 1998 earnings. Among the items covered by these charges are the cost of the employee reduction program; charges for certain slow-moving inventories as a result of the reduced demand levels; increased allowances for doubtful accounts due to customer payment problems-particularly from certain customers in the Far East; and loss reserves against certain automation contracts which, due to the slowdown in the data storage segment, have been yet to be completed. Including these charges and acquisition-related charges recorded in the first quarter of fiscal 1998, the Company now expects to report full-year net earnings per common diluted share in the range of $.58 per share to $.63 per share. Mr. Willis, commenting on the savings estimated from the actions announced today, stated, "these actions are expected to save the Company from $2 million to $3 million during fiscal 1999."

Zygo Corporation designs, develops, manufactures, and markets high performance measurement and yield improvement instruments, custom automation systems, and accessories used in high technology industries. The Company is headquartered in Middlefield, Connecticut, and also has operations in Asslar, Germany; Longmont, Colorado; and sales offices throughout the world. ZYGO is traded on the Nasdaq National Market under the symbol ZIGO. Additional information on the Company is available on the Internet at www.zygo.com.

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company's current judgment on certain issues. Because such statements apply to future events, they are subject to risks and uncertainties that could cause the actual results to differ materially. Important factors which could cause actual results to differ materially are described in the Company's reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission.


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