Cadence Reports Q3 2008 Revenue of $232 Million and Completion of Accounting Investigation

A reconciliation of Cadence's previously reported and restated Statements of Operations for the quarter ended March 29, 2008, the quarter ended June 28, 2008 and the six months ended June 28, 2008 is included with this release.

Cadence is preparing its third quarter Form 10-Q, together with amended Form 10-Qs for the first and second quarter of 2008, and expects to file all three reports no later than December 12, 2008.

The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially.

Business Outlook

For the fourth quarter of 2008, the company expects total revenue in the range of $215 million to $225 million. Fourth quarter GAAP net loss per diluted share is expected to be in the range of $(0.29) to $(0.27). Net loss per diluted share using the non-GAAP measure defined below is expected to be in the range of $(0.06) to $(0.04).

For the full year 2008, the company expects total revenue in the range of $1.025 billion to $1.035 billion. On a GAAP basis, net loss per diluted share for fiscal 2008 is expected to be in the range of $(1.13) to $(1.11). Using the non-GAAP measure defined below, net loss per diluted share for fiscal 2008 is expected to be in the range of $(0.06) to $(0.04).

A schedule showing a reconciliation of the business outlook from GAAP net loss and diluted net loss per share to the non-GAAP net loss and diluted net loss per share is included with this release.

Audio Webcast Scheduled

Lip-Bu Tan, Cadence's Interim Vice Chairman and member of the Interim Office of the Chief Executive, Charlie Huang, Cadence's Senior Vice President and member and chief of staff of the Interim Office of the Chief Executive, and Kevin S. Palatnik, Cadence's Senior Vice President and Chief Financial Officer and member of the Interim Office of the Chief Executive, will host a third quarter 2008 financial results audio webcast today, December 10, 2008, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the Web site at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting December 10, 2008 at 5 p.m. (Pacific) and ending December 17, 2008 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/company/investor_relations.

About Cadence

Cadence enables global electronic-design innovation and plays an essential role in the creation of today's integrated circuits and electronics. Customers use Cadence® software and hardware, methodologies, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. The company is headquartered in San Jose, Calif., with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about Cadence and its products and services is available at www.cadence.com.

Cadence is a registered trademark and the Cadence logo is a trademark of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

The statements contained above regarding the company's third quarter 2008 results, and the results of the accounting investigation, as well as the comments in the Business Outlook section and the statements by Lip-Bu Tan, Charlie Huang and Kevin Palatnik include forward-looking statements based on current expectations or beliefs, as well as a number of preliminary assumptions about future events that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Readers are cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence's control, including but not limited to: (i) Cadence's ability to compete successfully in the electronic design automation product and the commercial electronic design and methodology services industries; (ii) Cadence's ability to successfully complete and realize the expected benefits of the previously announced restructuring without significant unexpected costs or delays; (iii) the mix of products and services sold and the timing of significant orders for its products, and its shift to a ratable license structure, which may result in changes in the mix of license types; (iv) change in customer demands, including the possibility that Cadence's previously announced restructuring and management changes could result in delays in customers' purchases of products and services; (v) economic and industry conditions in regions in which Cadence does business; (vi) fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; (vii) capital expenditure requirements, legislative or regulatory requirements, interest rates and Cadence's ability to access capital and debt markets; (viii) the acquisition of other companies or technologies or the failure to successfully integrate and operate these companies or technologies Cadence acquires; (ix) the effects of the previously announced restructuring and management changes on Cadence's business, including its strategic and customer relationships, ability to retain key employees and stock prices; (x) the outcome of the previously announced accounting investigation conducted by the Audit Committee and Cadence's ability to timely remediate the material weakness; (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party; and (xii) the effect of any goodwill impairment analyses Cadence may perform in the future.

For a detailed discussion of these and other cautionary statements, please refer to the company's filings with the Securities and Exchange Commission. These include the company's Annual Report on Form 10-K for the year ended December 29, 2007 and the company's future filings.

GAAP to non-GAAP Reconciliation

Cadence management evaluates and makes operating decisions using various operating measures. These measures are generally based on the revenues of its product, maintenance and services business operations and certain costs of those operations, such as cost of revenues, research and development, sales and marketing and general and administrative expenses. One such measure is non-GAAP net income or net loss, which is a non-GAAP financial measure under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended, and is GAAP net income or net loss excluding, as applicable, amortization of intangible assets, stock-based compensation expense, in-process research and development charges, certain termination and legal costs, costs related to Cadence's withdrawn proposal to acquire Mentor Graphics Corporation and losses on the sale of Mentor Graphics Corporation shares, integration and acquisition-related costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive severance payments, restructuring charges and credits, losses on extinguishment of debt, equity in losses (income) from investments and write-down of investments. Intangible assets consist primarily of purchased or licensed technology, backlog, patents, trademarks, distribution rights, customer contracts and related relationships and non-compete agreements. Non-GAAP net income or net loss is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company's tax liability.

Cadence's management believes it is useful in measuring Cadence's operations to exclude amortization of intangible assets, in-process research and development charges and integration and acquisition-related costs because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by Cadence's management in the short term. In addition, Cadence's management believes it is useful to exclude stock-based compensation expense because it enhances investors' ability to review Cadence's business from the same perspective as Cadence's management, which believes that stock-based compensation expense is not directly attributable to the underlying performance of the company's business operations. Cadence's management also believes that it is useful to exclude restructuring charges and credits. During the fourth quarter of 2008, Cadence commenced a restructuring program that it expects to complete in the second half of fiscal 2009. Cadence's management believes that in measuring the company's operations, it is useful to exclude any such restructuring charges and credits because Cadence does not undertake significant restructuring on a regular basis, and exclusion of such charges permits consistent evaluations of Cadence's performance before and after such actions are taken. Cadence's management also believes it is useful to exclude executive severance costs and certain termination and legal costs as these costs do not occur frequently. Cadence's management believes it is useful to exclude gains or losses and expenses or credits related to the non-qualified deferred compensation plan assets as these gains and expenses are not part of Cadence's direct costs of operations, but reflect changes in the value of assets held in the non-qualified deferred compensation plan. Finally, Cadence's management believes it is useful to exclude the equity in losses (income) from investments and write-down of investments, as these items are not part of Cadence's direct cost of operations. Rather, these are non-operating items that are included in other income (expense) and are part of the company's investment activities.

In the third quarter of 2008, Cadence's non-GAAP net loss also excludes the impact of tax expense associated with Cadence's repatriation of foreign earnings. Cadence's management believes it is useful to exclude the tax expense associated with the repatriation of foreign earnings as it resulted from an event which is not expected to occur frequently.

In the third quarter of 2008, Cadence's non-GAAP net loss also excludes costs related to Cadence's withdrawn proposal to acquire Mentor Graphics Corporation and losses on the sale of Mentor Graphics Corporation shares Cadence acquired as part of the proposed acquisition. Cadence's management believes that in measuring Cadence's operations it is useful to exclude the costs and the losses associated with this proposed acquisition as these items are not directly related to Cadence's operating performance and resulted from events which are not expected to occur frequently.

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