The following discussion of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and the notes to those statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, and in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2007.

Statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations which express that we "believe," "anticipate," "plan," "expect," "seek," "estimate," or "should," as well as other statements which are not historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. Actual events or results may differ materially from those set forth in forward-looking statements. Certain factors that might cause such a difference are discussed in "Factors Affecting Our Business, Operating Results and Financial Condition" set forth in our Annual Report on Form 10-K for the year ended December 31, 2007.

OVERVIEW

The following Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, describes the principal factors affecting the results of our operations, financial condition and changes in financial condition, as well as our critical accounting policies and estimates. Our MD&A is organized as follows:

† Executive overview. This section provides a general description and history of our business, a brief discussion of our reportable segments, significant recent developments in our business and other opportunities, challenges and risks that may impact our business in the future.

† Critical accounting policies. This section discusses the accounting estimates that are considered important to our financial condition and results of operations and require us to exercise subjective or complex judgments in their application.

† Results of operations. This section provides our analysis of the significant line items on our consolidated statement of operations for the three and nine months ended September 30, 2008 compared to the three and nine months ended September 30, 2007.

† Liquidity and capital resources. This section provides an analysis of our liquidity and cash flow and a discussion of our outstanding debt and commitments.

† Recent accounting pronouncements. This section provides information about new accounting standards that have been issued but for which adoption is not yet required.

EXECUTIVE OVERVIEW

Business

Bruker Corporation and its wholly-owned subsidiaries design, manufacture, market and service proprietary life science and materials research systems based on our core technology platforms, including X-ray technologies, magnetic resonance technologies, mass spectrometry technologies, optical emission and infrared and Raman molecular spectroscopy technologies. We also manufacture and distribute a broad range of field analytical systems for chemical, biological, radiological and nuclear, or CBRN, detection. We maintain major technical and manufacturing centers in Europe, North America and Japan and we have sales offices located throughout the world. Our corporate headquarters are located in Billerica, Massachusetts.

Our business strategy is to capitalize on our ability to innovate and generate rapid revenue growth, both organically and through acquisitions. Our revenue growth strategy, combined with anticipated improvements to our

gross profit margins and increased leverage on our research and development, sales and marketing and distribution investments and general and administrative expenses, are expected to enhance our operating margins and improve our earnings in the future.

On February 26, 2008, we completed our acquisition of Bruker BioSpin. Both the Company and Bruker BioSpin were majority owned by six affiliated stockholders prior to the acquisition. As a result, the acquisition of Bruker BioSpin by the Company is considered a combination of companies under common control, and has been accounted for at historical carrying values. Historical unaudited condensed consolidated balance sheets, statements of operations, statements of cash flows and notes to the unaudited condensed consolidated financial statements have been restated by combining the historical consolidated financial statements of Bruker Corporation with those of Bruker BioSpin. In addition, because the transaction is accounted for as an acquisition of businesses under common control, all one-time transaction costs have been expensed as incurred.

With the addition of Bruker BioSpin, we enhanced our position as a leading supplier of life science and materials research systems. The technologies of Bruker BioSpin are particularly complementary to our accurate-mass electrospray time-of-flight mass spectrometers and our single-crystal diffraction X-ray spectrometers and are expected to create revenue synergies and provide opportunities to supply customers with equipment packages that have a broader range of applications and value. We believe the addition of Bruker BioSpin will also enhance our distribution in the Americas, Europe and Asia and our sales and service infrastructure, all of which should provide us with revenue growth opportunities and accelerate our drive to improve our margins, net income and operating cash flows.

Following the acquisition of Bruker BioSpin, management reevaluated the way we are managed and our internal reporting structure and, as a result of that evaluation, determined that we have four operating segments, representing each of our four divisions; Bruker AXS, Bruker Daltonics, Bruker Optics and Bruker BioSpin. Bruker AXS is in the business of manufacturing and distributing advanced X-ray and OES-spark instrumentation used in non-destructive molecular and elemental analysis. Bruker Daltonics is in the business of manufacturing and distributing mass spectrometry instruments that can be integrated and used along with other analytical instruments. Bruker Optics is in the business of manufacturing and distributing research, analytical and process analysis instruments and solutions based on infrared and Raman molecular spectroscopy technologies. Bruker BioSpin is in the business of manufacturing and distributing enabling life science tools based on magnetic resonance technology, as well as the development and manufacturing of low temperature superconductor and high temperature superconductor wires for use in advanced magnet technology and energy applications.

We have combined the Bruker AXS, Bruker Daltonics and Bruker Optics operating segments into the BioScience reporting segment because each has similar economic characteristics, product processes and services, types and classes of customers, methods of distribution and regulatory environments. Management reports its results based on the following reportable segments:

† BioScience. The operations of this segment include the design, manufacture and distribution of advanced instrumentation and automated solutions based on X-ray technology, OES-spark technology, mass spectrometry technology and infrared and Raman molecular spectroscopy technology. Typical customers of the BioScience segment include pharmaceutical, biotechnology, proteomics and molecular diagnostic companies, academic institutions, government agencies, semiconductor companies, chemical, cement, metals and petroleum companies, raw material manufacturers and food, beverage and agricultural companies.

† BioSpin. The operations of this segment include the design, manufacture and distribution of enabling life science tools based on its core technology, magnetic resonance, as well as the manufacturing and development of low temperature superconductor (LTS) and high temperature superconductor (HTS) wires for use in advanced magnet technology and in energy applications. Typical customers of the BioSpin segment include pharmaceutical and biotechnology companies, academic institutions and government agencies.

Financial Overview

For the three months ended September 30, 2008, our revenue increased by $0.3 million, or 0.1%, to $242.1 million, compared to $241.8 million for the comparable period in 2007. Included in this change in revenue is approximately $13.6 million from the impact of foreign exchange. Excluding the effect of foreign exchange, revenue decreased by $13.3 million, or 5.5%. The decrease in revenue, excluding the effect of foreign exchange, is attributable to a decrease in system and wire revenue in the BioSpin segment and is related primarily to lower sales of magnetic resonance systems. Because of the nature of the magnetic resonance products sold by the BioSpin segment, BioSpin segment revenues are generally subject to a high degree of volatility when comparing any two quarters, whether they be year-over-year or sequential.

For the nine months ended September 30, 2008, our revenue increased by $104.4 million, or 15.2%, to $792.0 million, compared to $687.6 million for the comparable period in 2007. Included in this change in revenue is approximately $62.1 million from the impact of foreign exchange. Excluding the effect of foreign exchange, revenue increased by $42.3 million, or 6.1%. The increase in revenue, excluding the effect of foreign exchange, is attributable to increases in system and aftermarket revenues in the BioScience segment. BioScience segment revenues increased through growth of a number of product lines, particularly X-ray systems, molecular spectroscopy systems and chemical detection systems.

Income from operations for the three months ended September 30, 2008 was $15.1 million, resulting in an operating margin of 6.3%, compared to income from operations of $29.8 million, resulting in an operating margin of 12.3%, for the comparable period in 2007. Income from operations decreased as a result of the lower gross profit margins and higher operating expenses for the three months ended September 30, 2008 when compared to the comparable period in 2007.

Our gross profit margin for the third quarter of 2008 was 45.5%, compared 46.0% for the comparable period in 2007. Lower gross margins were driven primarily by the the mix of products sold and pricing pressure in certain product lines. Additionally, the increase in operating expenses related primarily to higher sales and marketing expenses and higher research and development expenses. The higher costs are a result of increased headcounts in support of our planned revenue growth and new product development and higher material costs associated with a number of new products recently released, or scheduled to be released over the next six months. Changes in foreign currency exchange rates, primarily the Euro, also contributed significantly to the increase in operating expenses as a majority of our research and development is performed in Europe.

Income from operations for the nine months ended September 30, 2008 was $59.5 million, resulting in an operating margin of 7.5%, compared to income from operations of $71.3 million, resulting in an operating margin of 10.4%, for the comparable period in 2007. Income from operations for the nine months ended September 30, 2008 includes $6.2 million of charges related to the acquisition of Bruker BioSpin and income from operations for the nine months ended September 30, 2007 includes $0.5 million of charges related to the acquisition of Bruker BioSpin. Income from operations, excluding the effect of acquisition-related charges, decreased despite higher revenues and constant gross margins, as a result of higher operating expenses.

Our gross profit margin for the nine months ended September 30, 2008 and 2007 was 44.4%. While gross profit margin was unchanged for the nine months ended September 30, 2008 in comparison to the nine months ended September 30, 2007, the increase in revenue described above resulted in gross margin improvement through better factory utilization. Improvements resulting from utilization were offset by the mix of products sold and increased pricing pressure in certain product lines. Additionally, the increase in operating expenses related primarily to higher sales and marketing expenses and higher research and development expenses. The higher costs are a result of increased headcounts in support of our planned revenue growth and new product development, higher commissions associated with the increase in revenue described above and higher material costs associated with a number of new products scheduled to be released over the next six months. Changes in foreign currency exchange rates, primarily the Euro, also contributed significantly to the increase in operating expenses as a majority of our research and development is performed in Europe.

Income from operations for the three and nine months ended September 30, 2008 has been below management's expectations and, as a result, we began implementing cost savings programs throughout our organization. The objective of these programs is to refocus our gross margin improvement programs, reduce our

operating and interest expenses and further reduce our exposure to changes in foreign currency exchange rates. We have also implemented certain programs to improve our effective tax rate. We currently expect that the implementation of these initiatives will result in restructuring charges of approximately $6.0 million.

During the nine months ended September 30, 2008, we recorded net losses on foreign currency transactions of $5.9 million compared to net losses of $2.4 million for the comparable period in 2007. Foreign exchange losses of $12.2 million were incurred in the first three months of 2008 and were driven by the re-measurement of certain foreign currency denominated assets, principally cash, inter-company receivables and a short-term inter-company loan into the functional currency of the affected entities. The losses in the first quarter of 2008 resulted from the weakening of the U.S. Dollar and the Euro relative to the Swiss Franc by approximately 11% and 3%, respectively, from the date of closing of the Bruker BioSpin acquisition to the end of the first quarter of 2008. In the second and third quarters of 2008, we recorded cumulative gains on foreign currency transactions of $6.3 million that were also the result of the re-measurement of certain foreign currency denominated assets but we experienced less volatility as a result of settling inter-company balances in a timelier manner and reducing certain foreign currency denominated assets.

We incurred approximately $7.2 million of interest expense on acquisition-related debt during the nine months ended September 30, 2008, of which approximately $1.6 million was incurred in the third quarter of 2008. There was no acquisition-related debt outstanding during the three and nine months ended September 30, 2007. We repaid approximately $180.0 million of acquisition-related debt during the nine months ended September 30, 2008, of which approximately $21.0 million was repaid during the third quarter of 2008.

Our effective tax rate for the nine months ended September 30, 2008 was 24.2%, resulting from a tax benefit of $2.0 million recorded during the three months ended September 30, 2008 and a tax provision of $14.5 million recorded in the first half of 2008. The tax benefit in the third quarter of 2008 was primarily the result of $10.9 million related to reversing certain valuation allowances and reaching the more-likely-than-not threshold for recognizing certain tax receivables.

Our net income for the three months ended September 30, 2008 was $17.8 million, or $0.11 per diluted share, compared to net income of $26.7 million, or $0.16 per diluted share, for the comparable period in 2007.

Our net income for the nine months ended September 30, 2008 was $38.8 million, or $0.23 per diluted share, compared to net income of $58.7 million, or $0.36 per diluted share, for the comparable period in 2007.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, allowance for doubtful accounts, inventories, goodwill, long-lived assets, warranty costs and income taxes. We base our estimates and judgments on historical experience, current market and economic conditions, industry trends and other assumptions that we believe are reasonable and form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

We believe the following critical accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment.

Revenue recognition. We recognize revenue from system sales when persuasive evidence of an arrangement exists, the price is fixed or determinable, title and risk of loss has been transferred to the customer and collectibility of the resulting receivable is reasonably assured. Title and risk of loss is generally transferred to the customer upon receipt of a signed customer acceptance form for a system that has been shipped, installed, and for which the

customer has been trained. As a result, the timing of customer acceptance or readiness could cause our reported revenues to differ materially from expectations. When products are sold through an independent distributor or a strategic distribution partner, which assumes responsibility for installation, we recognize the system sale when the product has been shipped and title and risk of loss have been transferred. Our distributors do not have price protection rights or rights of return; however, our products are typically warranted to be free from defect for a period of one to two-years. Revenue is deferred until cash is received when a significant portion of the fee is due over one year after delivery, installation and acceptance of a system. For arrangements with multiple elements, we recognize revenue for each element based on the fair value of the element, provided all other criteria for revenue recognition have been met. The fair value for each element provided in multiple element arrangements is typically determined by referencing historical pricing policies when the element is sold separately. Changes in our ability to establish the fair value for each element in multiple element arrangements could affect the timing of revenue recognition. Revenue from accessories and parts is recognized upon shipment and service revenue is recognized as the services are performed. Grant revenue is recognized when we complete the services required under the grant.

Warranty costs. We normally provide a one to two-year parts and labor warranty with the purchase of equipment. The anticipated cost for this warranty is accrued upon recognition of the sale and is included as a current liability on the balance sheet. Although our facilities undergo quality assurance and testing procedures throughout the production process, our warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Although our actual warranty costs have historically been consistent with expectations, to the extent warranty claim activity or costs associated with servicing those claims differ from our estimates, revisions to the warranty accrual may be required.

Inventories. Inventories are stated at the lower of cost or market, with costs determined by the first-in, first-out method for a majority of subsidiaries and by average cost for one international location. We maintain an allowance for excess and obsolete inventory to reflect the expected non-saleable or non-refundable inventory based on an evaluation of slow moving products. If ultimate usage or demand varies significantly from expected usage or demand, additional write-downs may be required, resulting in a charge to operations.

Goodwill, other intangible assets and other long-lived assets. We evaluate whether goodwill and indefinite lived intangible assets are impaired annually and when events occur or circumstances change. Goodwill is impaired when the fair value of a reporting unit is less than its carrying amount. Fair value is determined using market comparables for similar businesses or forecasts of discounted future cash flows. We also review long-lived intangible assets and other assets when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets. Should the fair value of our long-lived assets decline because of reduced operating performance, market declines, or other indicators of impairment, a charge to operations for impairment may be necessary.

Allowance for doubtful accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to pay amounts due. If the financial condition of our customers were to deteriorate, reducing their ability to make payments, additional allowances would be required, resulting in a charge to operations.

Income taxes. We estimate the degree to which tax assets and loss carryforwards will result in a benefit based on expected profitability by tax jurisdiction, and provide a valuation allowance for tax assets and loss carryforwards that we believe will more likely than not go unused. If it becomes more likely than not that a tax asset or loss carryforward will be used for which a reserve has been provided, we reverse the related valuation allowance. If our actual future taxable income by tax jurisdiction differs from estimates, additional allowances or reversals of reserves may be necessary.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2008 Compared to the Three Months Ended September 30, 2007

Consolidated Results

The following table presents our results for the three months ended September 30, 2008 and 2007 (dollars in

thousands):

                                                               Three Months Ended
                                                                  September 30,
                                                               2008           2007
Product revenue                                             $   209,936    $  215,838
Service revenue                                                  30,638        24,848
Other revenue                                                     1,490         1,074
Total revenue                                                   242,064       241,760

Cost of product revenue                                         113,841       115,424
Cost of service revenue                                          18,153        15,228
Total cost of revenue                                           131,994       130,652
Gross profit                                                    110,070       111,108
Operating expenses:
Sales and marketing                                              44,173        38,327
General and administrative                                       17,675        15,580
Research and development                                         33,089        26,841
Acquisition-related charges                                           -           544
Total operating expenses                                         94,937        81,292
Operating income                                                 15,133        29,816

Interest and other income (expense), net                            814         1,580
Income before income tax provision and minority interest
in consolidated subsidiaries                                     15,947        31,396

Income tax provision (benefit)                                   (1,966 )       4,616

Income before minority interest in consolidated
subsidiaries                                                     17,913        26,780
Minority interest in consolidated subsidiaries                       73           109

Net income                                                  $    17,840    $   26,671
Net income per common share - basic and diluted             $      0.11    $     0.16

Weighted average common shares outstanding:
Basic                                                           162,847       161,922
Diluted                                                         165,918       164,224

Revenue

Our revenue increased by $0.3 million, or 0.1%, to $242.1 million for the three months ended September 30, 2008, compared to $241.8 million for the comparable period in 2007. Included in this change in revenue is approximately $13.6 million from the impact of foreign exchange. Excluding the effect of foreign exchange, revenue decreased by 5.5%. The decrease in revenue, excluding the effect of foreign exchange, is attributable to a decrease in system and wire revenue in the BioSpin segment and is related primarily to lower sales of magnetic resonance systems. Because of the nature of the magnetic resonance products sold by the BioSpin segment, BioSpin segment revenues are generally subject to a high degree of volatility when comparing any two quarters, whether they be year-over-year or sequential.

Cost of Revenue

Our cost of product and service revenue for the three months ended September 30, 2008, was $132.0 million, resulting in a gross profit margin of 45.5%, compared to cost of product and service revenue of $130.7 million, resulting in a gross profit margin of 46.0%, for the comparable period in 2007. Lower gross margins were driven primarily by the mix of products sold and pricing pressure in certain product lines.

Sales and Marketing

Our sales and marketing expense for the three months ended September 30, 2008 increased to $44.2 million, or 18.4% of product and service revenue, from $38.3 million, or 15.9% of product and service revenue, for the comparable period in 2007. The increase in sales and marketing expense is attributable to increases in headcount in support of our planned revenue growth. Additionally, changes in foreign currency exchange rates, primarily the Euro, have contributed to an increase in sales and marketing expense.

General and Administrative

Our general and administrative expense for the three months ended September 30, 2008 increased to $17.7 million, or 7.3% of product and service revenue, from $15.6 million, or 6.5% of product and service revenue, for the comparable period in 2007. The increase is attributable to additional headcount and was related primarily to Bruker BioSpin becoming part of a publicly-traded company and, to a lesser degree, other acquisitions made during the nine months ended September 30, 2008.

Research and Development

. . .