SecProbe.io

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COVINGTON & BURLING

1330 AVENUE OF THE AMERICAS    NEW YORK                     BRUCE C. BENNETT
NEW YORK, NY 10019             WASHINGTON
TEL 212.841.1000               SAN FRANCISCO                TEL 212.841.1060
FAX 212.841.1010               LONDON                       BBENNETT@COV.COM
WWW.COV.COM                    BRUSSELLS

                                        December  9,  2005

Ms.  Angela  Crane
Branch  Chief
Ms.  Julie  Sherman
Staff  Accountant
Securities  and  Exchange  Commission
Division  of  Corporation  Finance
Station  Place
100  F  Street,  N.E.
Washington,  D.C.  20549

Re:  The  GSI  Group,  Inc.
     Form  10-K  for  the  year  ended  December  31,  2004
     Filed  April  15,  2005
     File  No.  333-43089

Dear  Ms.  Crane  and  Ms.  Sherman:

I write on behalf of our client, The GSI Group, Inc. ("GSI" or the "Company") to
respond  to  oral  comments  conveyed  on our call with you on November 7, 2005.

In  that call, you asked the Company to clarify its recent disclosures regarding
the  restatement  of prior period financial statements.  In particular, you have
asked  the  Company  to  clarify  the  restatement adjustments to its previously
reported  inventories  and gross margins to correct for what management believes
was  the  improper  application  of the Company's accounting policies related to
slow-moving,  excess  and  obsolete  inventory.

GENERAL  BACKGROUND
A  summary of the Company's inventory-related balances, as restated, is provided
below.  In  the  case of balance sheet items, the amounts represent the balances
at  the end of the respective period and, in the case of income statement items,
the  amounts  represent  the  balances  for the respective period (in thousands,
except  for  margin  data).

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<TABLE>
<CAPTION>

<S>                             <C>        <C>        <C>
Raw materials                       2002       2003       2004

                                $ 16,834   $ 13,653   $ 22,876
Work-in-progress ("WIP")          15,852     15,587      8,399
Finished goods                    18,175     14,919     19,711
     Total Gross Inventory        50,841     44,159     50,986
                                ---------  ---------  ---------
Inventory valuation allowance     (2,057)    (1,774)    (2,333)
     Total Net Inventory
Sales                           $ 48,784   $ 42,385   $ 48,653
                                ---------  ---------  ---------

                                $229,518   $236,868   $288,131
Cost of goods sold               187,528    188,197    224,027
     Gross profit
     Gross margin               $ 41,990   $ 48,671   $ 64,104
                                ---------  ---------  ---------
                                   18.29%     20.55%     22.55%
</TABLE>

The  majority  of  the  Company's  raw  material inventory consists of raw steel
(sheets  or  rolls) and various types of resin.  As a general matter, management
does  not  believe  there is a significant risk of loss related to the Company's
raw  material  inventory  given that (i) it turns relatively quickly, (ii) it is
usable  across  a  wide range of the Company's stock keeping units ("SKUs"), and
(iii)  its  generic  commodity  nature  provides the Company with the ability to
dispose  of  it  and  recover  amounts  approximating  its  cost.

The  Company's  WIP  and  finished goods inventory, on the other hand, comprises
over  45,000  SKUs  and reflects the complex nature and breadth of the Company's
product  line.  Further,  much  of  this  inventory  is  specific  to individual
products and turns relatively slowly.  Consequently, management believes that at
any  given  balance  sheet  date  it  is  probable that a certain portion of the
Company's  WIP  and  finished  goods inventory is impaired inasmuch as there are
items on-hand in excess quantities and/or at risk of obsolescence due to product
line  changes  that the Company has made and will continue to make in the normal
and  ordinary  course  of  its business. This same complexity of product mix and
SKUs,  however,  renders  it  practically  impossible to identify with precision
those  specific  SKUs  which are likely to be on-hand in excess quantities or at
risk  of  obsolescence.

THE  COMPANY'S  ACCOUNTING  POLICY  AND  METHODOLOGY
The Company's basic accounting policy for inventory is to record it at the lower
of  cost  (using  the  first-in,  first-out  method)  or market, consistent with
Accounting  Research  Bulletin  ("ARB")  No.  43.

For  the reasons described above, management believes that a valuation allowance
against WIP and finished goods inventory to reduce it to market, as that term is
defined  in  paragraph  8  of  ARB  43,  Chapter  4,  is required at each of the
respective  balance  sheet dates.  As discussed above, the inherent complexities
of  the  Company's  inventory  and  product  lines and the general difficulty in
predicting  volumes  in  the  Company's  individual  product lines, which depend
heavily  on  factors  such as weather, crop yields and commodity prices, make it
practically  impossible  to  identify  this  probable risk (i.e., the difference

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between  the  carrying  cost  and  market)  at the SKU level.  Consequently, the
Company employs the methodology outlined below to quantify the aggregate risk in
its  inventory  and  to establish the appropriate amount of valuation allowance.

-     In  terms  of  the  Company's  raw  material inventory, at the end of each
reporting  period  management performs a detailed review of the items on-hand to
identify  those specific items where a reduction to market is required.  For the
reasons  outlined  above,  however,  a  write-down  of  raw  materials is rarely
required.

-     In  terms  of  WIP  and  finished  goods  inventory:

o     At  the  end  of  each reporting period, the Company's information systems
allows  management  to  prepare  analyses  that highlight WIP and finished goods
inventory  SKUs  that  have  quantities  on-hand that are in excess of the total
quantity  of  those  SKUs  that  were  used by the Company (in production and/or
sales)  during  the  previous  36  months.

o     Management  then reviews these analyses, and excludes from them those SKUs
that are obviously not on-hand in excess quantities.  These exclusions generally
relate  to  recent  product  introductions.

o     For  each  remaining  SKU, management then calculates the carrying cost of
the  quantities  on-hand  that  are  in  excess  of usage during the previous 36
months.

o     Management  then  uses  the  total  cost  thus derived as a tool to make a
reasonable  estimate of the probable aggregate losses that the Company is likely
to  incur  from  WIP  and  finished  goods  inventory  balances  at  period end.

AUTHORITATIVE  SUPPORT  FOR  THE  COMPANY'S  ACCOUNTING  POLICY
The  Company  acknowledges  that  the  methodology  used  to  reduce its WIP and
finished  goods inventory to market is based, in part, on SKU-level information.
It  is important to understand, however, that this SKU-level information is only
used  as a tool to estimate the aggregate losses (i.e., reductions to market) in
                                                  ----
the  Company's  inventory  portfolio.  The Company believes, and its independent
accountants  agree,  that  generally accepted accounting principles support this
aggregate approach to reserving against inventory losses, specifically Statement
7  and  paragraph  11  of  Chapter  4  of  ARB  43.

The  Company believes that Staff Accounting Bulletin Topic 5(bb) and paragraph 5
(footnote  2)  of  ARB  43  are  not  applicable  in  the  Company's  specific
circumstances  given  that  such  guidance  relates to the proper accounting for
write-downs  of  specific  inventory  items.

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THE  RESTATEMENT AND THE IMPACT OF THE COMPANY'S ACCOUNTING POLICY ON ITS INCOME
STATEMENT
Following  completion  of  the acquisition of the Company (which is described in
more  detail in the Company's Securities and Exchange Commission filings) on May
16,  2005  by  GSI  Holdings, Inc., current management performed a review of the
Company's  historical  financial  records  and accounting practices.  Based upon
this  review,  current  management determined that the prior management team had
failed  to  consistently  and  accurately follow the inventory accounting policy
described above, and it was thus necessary to restate the Company's prior period
financial statements to correct for these errors in accordance with paragraph 13
and  36  of  Accounting  Principles  Board  ("APB")  Opinion  No.  20.

Correcting  these  errors  required  the  Company  to  recompute  the  amount of
valuation  allowance  for  inventory  that  was  appropriate  at each respective
balance  sheet  date  using  the  accounting policy outlined above (the restated
balances  are provided in the table above).  The year-on-year corrections in the
valuation  allowances  did,  in fact, decrease the Company's previously reported
cost  of goods sold by $283,000 in 2003 and increase the Company's cost of goods
sold  by  $1,307,000  in 2002 and by $559,000 in 2004. The Company believes, and
its  independent  accountants  agree,  that these increases and decreases result
from  the  correction  of  errors  in  computing  accounting  estimates  and, in
accordance  with paragraph 10 of APB 20, are therefore properly reflected in the
Company's  income statement.  It is also important to note that these changes in
the  level  of  valuation  allowance  required correlate with the changes in the
composition  and  levels  of  the  Company's  on-hand  inventories.

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                                   ***********

In  our  prior  call,  you  offered  to  make  available  a senior member of the
accounting  staff  should the Company wish to further discuss its interpretation
of  the propriety of its accounting treatment in this matter.  The Company would
like  to  engage  in that conversation.  I will call shortly to schedule a call.
If  you  believe  a  meeting  would be useful we would be happy to meet with the
staff  at  the  Commission's  offices.

Sincerely  yours,

/S/Bruce C. Bennett

Bruce  C.  Bennett

cc:     Mr.  Michael  Choe
          Charlesbank  Capital  Partners,  LLC

     Mr.  Randall  Paulfus
          The  GSI  Group,  Inc.

     Mr.  Leonard  Eschbach
          BKD,  LLP

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