UPDATE 2-Veeco Q4 beats Wall Street; sees strong Q1

* Q4 adj EPS $0.41 vs est. $0.34

* Q4 rev up 33 pct

* Sees Q1 adj EPS $0.41-$0.50 vs $0.38 est

* Sees Q1 gross margins at 43 pct-44 pct (Recasts; Adds analyst comments, conference call details)

By Manasi Phadke

BANGALORE, Feb 8 (Reuters) - Veeco Instruments Inc (VECO.O) posted better-than-expected quarterly results, helped by strength in all its businesses, and forecast a strong first quarter as the chip equipment maker continued to benefit from the growing LED market.

The company, which makes equipment used to produce LEDs, solar cells and data storage, expects first-quarter earnings of 41 cents to 50 cents a share, before items, on revenue of $150 million to $165 million.

Analysts were expecting Veeco to earn 38 cents a share on revenue of $143.3 million, according to Thomson Reuters I/B/E/S.

"We think we are gaining share on both bookings and revenue and have a very attractive ramp here," Chief Executive John Peeler said on a conference call with analysts, adding that Veeco exited the year with about 33 percent of revenue market share for MOCVDs.

"The company is probably winning market share at the expense of Aixtron," Merriman Curhan Ford analyst Bill Ong said.

The company has typically held about 30 percent of the market for MOCVD (metalorganic chemical vapor deposition equipment) equipment used to build the LEDs -- about half the share of bigger rival Germany's Aixtron AG (AIXGn.DE).

"Veeco will see growth a little better than the market," Piper Jaffray analyst Jesse Pichel said.

The LED market is growing so fast that the main concern for the company is to meet the demand rather than winning market share, he said.

CEO Peeler said given the market demand, Veeco's topmost priority would be to ramp its manufacturing capacity to 45 or more tools this quarter, to 70 tools in the second quarter, and to 120 tools per quarter, by the end of the year.

It is hard to envision a scenario that does not require 400 to 500 more tools per year in 2010 and 2011 for lighting applications alone, he added.

First quarter gross margins are expected to marginally decline on a sequential basis to 43 percent to 44 percent from the current 45 percent.

All three of Veeco's businesses -- LED and solar, data storage and metrology -- posted improved gross margins on a sequential basis, the company said in a statement.

Veeco recorded a backlog of $402 million at the end of December.

For the fourth quarter, Veeco earned $18.7 million, or 50 cents a share, compared with a loss of $74 million, or $2.35 a share, a year ago.

Excluding items, the company earned 41 cents a share, while analysts on average expected 34 cents a share.

Revenue rose 33 percent to $146.4 million, surpassing analysts' expectations of $130.7 million.

Operating expenses shrunk 61 percent to $45.4 million.

Shares of the Plainview, New York-based company dipped about 1 percent to $30.67 in trading after the bell. They closed at $31.05 Monday on Nasdaq. (Reporting by Manasi Phadke; Editing by Unnikrishnan Nair)