Mentor Graphics Lowers Fiscal 2009 Guidance and Announces Fiscal Third Quarter Conference Call

WILSONVILLE, Ore.—(BUSINESS WIRE)—November 11, 2008— Mentor Graphics Corporation (NASDAQ: MENT) announced that slowing customer activity has reduced the companys outlook for the second half of the fiscal year. Revenue is expected to be about $185 million for the fiscal third quarter ending October 31, 2008 with a non-GAAP loss of approximately $.05 per share. The current estimate of the GAAP loss per share is approximately $.80, which includes a GAAP tax provision for the third quarter of approximately $.50 per share. The tax provision is abnormally high as it includes recapture of tax benefits previously claimed in prior quarters as well as the continuing effect of tax expense in non-US jurisdictions.

For the fiscal fourth quarter ending January 31, 2009, the company now expects revenues of approximately $270 million, non-GAAP earnings per share of about $.55, and GAAP earnings per share of about $.60. For fiscal 2009, the company expects full year revenues of approximately $815 million, non-GAAP earnings per share of about $0.40 and a GAAP loss per share of about $.65.

Typically, our customers had been negotiating contract renewals a quarter or two before their expiration, said Walden C. Rhines, chairman and CEO of Mentor Graphics. In this economic environment, customers are now waiting until the contracts come closer to expiration to renew. We expect a number of sizeable contracts to renew in the next several quarters, which should lead to a stronger fiscal 2010 than fiscal 2009.

Given these pending contract renewals, the company anticipates fiscal first quarter 2010 revenues of $200 to $210 million, non-GAAP earnings per share between $.05 and $.10, and GAAP loss per share between $.01 and $.06.

These contract renewal delays should produce greater business linearity in fiscal 2010, said Gregory K. Hinckley, president of Mentor Graphics. Excluding acquisitions, non-GAAP expenses for the quarter were less than third quarter last year as a result of reductions in staffing undertaken earlier in the year, reduced incentive compensation and an improving foreign exchange environment.

Mentor Graphics will release financial results for its third fiscal quarter as well as revised fiscal 2009 guidance, on Wednesday, November 19 at 5:00 a.m. Pacific Time. Following the release, Mentor will host a live webcast to discuss the third quarter results, beginning at 5:30 a.m. Pacific Time.

What: Mentor Graphics live webcast of Q3 Fiscal Year 2009 financial results

When: Wednesday, November 19 at 5:30 a.m. Pacific Time.

Webcast: www.mentor.com/company/investor_relations

The company emphasized that the foregoing results are preliminary and are subject to adjustments upon final closing of financial results and completion of the quarterly review by independent accountants.

About Mentor Graphics

Mentor Graphics Corporation (NASDAQ: MENT) is a world leader in electronic hardware and software design solutions, providing products, consulting services and award-winning support for the worlds most successful electronics and semiconductor companies. Established in 1981, the company reported revenues over the last 12 months of about $850 million and employs approximately 4,500 people worldwide. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web site: http://www.mentor.com/.

(Mentor is a registered trademark of Mentor Graphics Corporation. All other company or product names are the registered trademarks or trademarks of their respective owners.)

Statements in this press release regarding the companys guidance for future periods constitute forward-looking statements based on current expectations within the meaning of section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company or industry results to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: (i) reductions in spending on the companys products and services by its customers due to the current weakness in the US and other economies; (ii) the companys ability to successfully offer software and hardware products and services that compete in the highly competitive EDA industry; (iii) product bundling or discounting of products and services by competitors, which could force the company to lower its prices or offer other more favorable terms to customers; (iv) effects of the increasing volatility of foreign currency fluctuations on the companys business and operating results; (v) changes in accounting or reporting rules or interpretations; (vi) the impact of tax audits by the IRS or other taxing authorities, or changes in the tax laws, regulations or enforcement practices where the company does business; (vii) effects of unanticipated shifts in product mix on gross margin; (viii) effects of customer seasonal purchasing patterns and the timing of significant orders which may negatively impact the company s quarterly results of operations, (ix) an industry downturn that could lead to smaller contract renewals by significant customers, and (x) the effect of any goodwill impairment analyses the company may perform in the future, all as may be discussed in more detail under the heading Risk Factors in the company s most recent Form 10-K or Form 10-Q. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. In addition, statements regarding guidance do not reflect potential impacts of mergers or acquisitions that have not been announced or closed as of the time the statements are made. Mentor Graphics disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements to reflect future events or developments.

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