SecProbe.io

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Mail Stop 6010

	December 29, 2005

Robin Adler
Chief Executive Officer
Nextest Systems Corporation
1901 Monterey Road
San Jose, CA 95112

Re:	Nextest Systems Corporation
	Registration Statement on Form S-1
	Filed December 2, 2005
	Registration No. 333-130100

Dear Mr. Adler:

      We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments.  If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary.  Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure.  After
reviewing this information, we may raise additional comments.

      Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects.  We welcome
any questions you may have about our comments or any other aspect
of
our review.  Feel free to call us at the telephone numbers listed
at
the end of this letter.

General

1. Please confirm that any preliminary prospectus you circulate
will
include all non-Rule 430A information.  This includes a bona fide
estimate of the range of the maximum offering price and the
maximum
number of securities offered.

2. Please provide us with copies of the industry reports you cite
throughout your prospectus.  Clearly mark the relevant sections
that
support the data you have included in your prospectus and the page
number of your prospectus where such data has been used.  Also
tell
us whether the sources of the cited data have consented to your
use
of their names and data and whether any of the reports were
commissioned by you or prepared specifically for your use.

3. Please provide us with copies of any graphics you intend to use
in
your prospectus on confirm that you do not intend to use any
graphics.

Prospectus Summary, page 1

4. We note your disclosure that you "target" high growth segments
of
the semiconductor industry, such as the flash memory and flash-
based
SOC markets, that your products are "used" to test other high
growth,
high volume integrated circuits such as microcontrollers, smart
cards, and field programmable logic devices, and that your systems
are used during the design process.  Please revise your disclosure
to
also indicate what percentage of your historical revenues has been
derived from each of these markets.

5. We note your disclosure in the second paragraph.  Please
briefly
clarify for your investors how the expected growth in the flash
memory market, when measured in terms of megabytes, is relevant to
your future prospects.
6. We note your reference to the iPod nano at the end of the first
paragraph.  Please tell us why this reference is appropriate
disclosure for your prospectus summary.  For example, please tell
us
whether you have historically derived a material portion of your
revenues from sales of your products used in connection with the
iPod
nano.

7. Briefly describe your reliance on your key customers for a
significant portion of your revenues.

Our Strategy, page 2

8. We note that your objective is to be "the leading supplier of
ATE
systems for flash memory and other high volume, low-cost IC
markets."
We also note your disclosure on page 1 that the market in 2004 for
ATE systems was $4.8 billion and that your revenues for the fiscal
year ended June 30, 2005 were $48.5 million.  Given that you
currently appear to represent approximately 1% of the market for
ATE
systems, please balance your disclosure regarding your strategy to
present the challenges you will face and to discuss with greater
specificity how you will increase your market share in order to
achieve your objective.

9. We note your disclosure that you face a "variety of
challenges."
Please revise your summary to briefly indicate the most
significant
risks or challenges you face.

Risk Factors, page 6

10. We note your disclosure in the last sentence under "Gross
Profit"
on page 31 that you believe that as you attempt to win more market
share you will experience pricing pressures that may result in
lower
gross profits.  Please expand your risk factor disclosure to
describe
these risks.

We rely on a small number of customers..., page 7

11. Expand to briefly explain why the percentage of sales to Atmel
and SanDisk declined over the periods.  Also state that sales to
Hynix accounted for 59% of your September 30, 2005 sales.

A sale of a substantial number of shares of our common stock...,
page
16

12. Please disclose the number of shares of your common stock that
are subject to registration rights or that you have otherwise
agreed
to register for resale under the Securities Act.

The underwriters may have a conflict of interest in connection
with
this offering, page 16

13. Please indicate the material risks presented to your investors
from the potential conflicts of interest.
14. Expand the disclosure to state the actual percentages of
outstanding preferred stock held by each of the underwriters and
their affiliates, rather than stating beneficial ownership as
"less
than 10%" or "more than 10%."  Reconcile the disclosure here with
that in the "Principal and Selling Stockholders" table on page 65.
For example, you state here that entities affiliated with SG Cowen
&
Co. beneficially owned in the aggregate more than 10% of your
outstanding preferred stock, yet that is not reflected in the
beneficial ownership table.
15. Explain in more detail why Needham & Company, LLC, whose
affiliates own 2.4 million shares of your preferred stock, is
described as owning "less than 5% of [your] outstanding preferred
stock" and can serve as a qualified independent underwriter in
this
offering.  We note the beneficial ownership table states Needham
affiliates hold 9.32% of the outstanding preferred stock.

Capitalization Table, page 21

16. Revise to remove the caption relating to cash and cash
equivalents from your presentation of capitalization.

Dilution, page 22

17. Please expand your disclosure after the second table to also
include the dilution to be experienced by your new investors if
the
underwriters exercise their over-allotment option in full, such as
the increase in pro forma net tangible book value per share
attributable to your offering and the dilution in pro forma net
tangible book value per share to new investors.

18. We note your discussion of the further dilution to be
experienced
by your new investors to the extent your outstanding stock options
are exercised.  Please also explain how the "shares purchased" and
"total consideration" columns in your second table would change
due
to the exercise of outstanding options.

Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 25

Sales, General and Administrative, page 26

19. Please clarify the disclosure in the second to last sentence
to
indicate with more specificity the factors that cause the
commission
expenses included in SG&A expenses to fluctuate with changes in
revenue and changes in customer mix comprising your revenue.  If
certain of your product lines carry a higher commission expense,
such
as your Magnum product line, please indicate the effects of
increased
sales of those product lines on your results of operations.

Results of Operations, page 30

20. Where changes in financial statement amounts are attributable
to
known factors, each factor should be separately quantified and
discussed to the extent practicable.  As an example, we note your
disclosure regarding the primary reason for your increase in
product
revenues for the three months ended September 30, 2005 and for
your
2005 fiscal year as compared to the prior comparable periods was
primarily attributable to the increased sales of your Magnum
product.
Please revise your results of operations and your discussion of
liquidity and capital resources accordingly.

Comparison of the Three Months Ended September 30, 2005 and 2004,
page 30

Net Revenue, page 30

21. Please revise your discussion of changes in net revenue to
separately describe and quantify the effects of changes in unit
prices and volume on reported revenues for each major product
line.
Refer to Item 303 (a)(3)(iii) of Regulation S-K.

Business, page 41

22. In your risk factor entitled "In the event of environmental
contamination...," you address the risks related to "federal,
state
and local laws governing the environment."  Please briefly
describe
the laws that may affect your business and discuss any material
effects that compliance with those laws could have on your capital
expenditures, earnings and competitive position.  See Item
101(c)(xii) of Regulation S-K.

Management, page 54

23. We note that your chief executive officer continues to serve
as
president of Sytest Systems Corporation which was co-founded by
your
chief executive officer and vice president of operations.  In an
appropriate section of your document, please briefly describe the
business of Sytest, highlight any risks that may arise as a result
of
these relationships and as a result of the devotion of your
officers`
efforts to that company, and disclose the portion of time that
your
chief executive officer devotes to Sytest.

Related Party Transactions, page 64

24. State how much of the bonus payment was made to each named
individual who received a loan.  Also clarify whether all the
shares
that were initially issued to the four individuals were
repurchased
in exchange for extinguishment of their debt.

Principal and Selling Stockholders, page 65

25. Please identify the natural person(s) with voting or
investment
control over the shares held by Needham Capital Partners and J. &
W.
Seligman & Co.

26. Please clarify in footnote (8) whether the shares of
restricted
stock that will vest upon completion of the offering will remain
subject to your right of repurchase after your offering or whether
your repurchase rights will lapse once the shares are vested.

27. Tell us whether any selling stockholder is a broker-dealer or
an
affiliate of a broker dealer.  If a selling stockholder is a
broker-
dealer, it must be identified as an underwriter with respect to
the
shares that it is offering for resale.  If a selling stockholder
is
an affiliate of a broker-dealer, it must be identified as an
underwriter with respect to the shares that it is offering for
resale
unless the selling stockholder is able to make the following
representations in the prospectus:

* The selling stockholder purchased the shares being registered
for
resale in the ordinary course of business; and

* At the time of the purchase, the selling stockholder had no
agreements or understandings, directly or indirectly, with any
person
to distribute the securities.

      Please revise your disclosure accordingly.

Shares Eligible for Future Sale, page 70

28. Please include a table quantifying the portion of the
restricted
securities that will be subject to the volume and other
restrictions
of Rule 144 after the completion of your offering and the date(s)
that those securities will be eligible for resale, the number of
restricted securities that will be eligible for resale under Rule
144(k) after the completion of the offering and the date(s) that
those securities will be eligible for resale, and the number of
restricted securities, if any, that will be eligible for resale
under
Rule 701 after the completion of the offering and the date(s) that
those securities will be eligible for resale, in all cases taking
into account the impact of the holding periods required under the
lockup agreements.

Underwriting, page 72

29. Explain in more detail the nature of the conflict of interest
with SG Cowen & Co., and why Needham & Company, LLC, is eligible
to
be a qualified independent underwriter given the share ownership
by
its affiliates and the fact that an affiliate appears to be a
selling
shareholder in the offering.  Confirm that NASD agrees with this
determination.

Consolidated Financial Statements, page F-1

30. Consideration should be given on an ongoing basis to the
updating
requirements of Rule 3-12 of Regulation S-X.

Report of Independent Registered Public Accounting Firm, page F-2

31. We note your "draft" report for the effect of the
reincorporation
described in Note 13.  Prior to going effective the audit report
should be signed and unrestricted.

Note 1 - The Company and Basis of Presentation, page F-8

Revenue Recognition, page F-9

32. We note your disclosure that multiple deliverables are
accounted
for separately in accordance with EITF 00-21. Reference to
accounting
literature is not specifically descriptive to determine your
accounting. Please revise the filing to disclose your accounting
under EITF 00-21.

Stock-based compensation, page F-15

33. Provide us with an itemized chronological schedule detailing
each
issuance of your common shares, preferred stock, stock options and
warrants since December 2004 through the date of your response.
Include the following information for each issuance or grant date:

* Number of shares issued or issuable in the grant
* Purchase price or exercise price per share
* Any restriction or vesting terms
* Management`s fair value per share estimate
* How management determined the fair value estimate
* Identity of the recipient and relationship to the company
* Nature and terms of any concurrent transactions with the
recipient
* Amount of any recorded compensation element and accounting
literature relied upon to support the accounting.

In the analysis requested above, highlight any transactions with
unrelated parties believed by management to be particularly
evident
of an objective fair value per share determination.  Please
provide
us with a chronological bridge of management`s fair value per
share
determinations to the current estimated IPO price per share.
Also,
indicate when discussions were initiated with your underwriter(s)
about possible offering price ranges.  We will delay our
assessment
of your response pending inclusion of the estimated IPO price in
the
filing.

Note 2 - Balance Sheet Components, page F-20

34. Please explain in greater detail your policy with respect to
demonstration equipment, evaluation units and field service
inventory.  Explain the contractual terms under which they have
been
loaned and if you sell these to customers. Also, explain over what
period you are depreciating the demonstration equipment and where
it
is recorded in your income statements.

35. In this regard, please provide the amount of demonstration
equipment, evaluation equipment and field service inventory sold
in
each period presented.  We assume that these inventories were sold
at
lower margins then other inventories.  Please tell us if they have
a
material impact on gross margins.  If so, revise to disclose
separately in MD&A.

Note 6 - Convertible Preferred Stock, page F-24

36. For each convertible preferred stock agreement, please tell us
and disclose the significant terms of the preferred stock.
Significant terms include settlement alternatives and the party
that
controls settlement and conversion rates, as well as caps and
floors
on those rates. Please also tell us and disclose how you accounted
for the issuance of the convertible preferred stock. Cite the
accounting literature upon which you relied and explain in detail
how
you applied that literature to the terms of your agreements. The
response should address the accounting for the host contract and
any
embedded derivatives, including classification and valuation of
each.
The response should also specifically discuss your consideration
of
any variable rate conversion features.

37. In this regard, we note that your registration rights
agreement
requires