IKOS Systems Reports Record Third Quarter Results

CUPERTINO, CA - July 19, 2000 -- IKOS Systems Inc. (NASDAQ:IKOS), a leading provider of design verification solutions, today announced results for the third quarter of fiscal 2000. Revenues for the quarter ended July 1, 2000, grew 23 percent to $18.4 million, compared with $15.0 million for the same quarter of fiscal 1999. Net income nearly tripled for the quarter to $2.3 million, or $0.23 per diluted share, compared with net income of $784,000, or $0.08 per diluted share, for the same quarter last year.

"We are very pleased with our record results and with the continued market adoption of our latest emulation products," said Ramon Nunez, president and chief executive officer of IKOS. "The quarter marked a significant milestone in our transition to the emulation market, with emulation products accounting for approximately 50 percent of international product bookings and over 65 percent of worldwide product bookings. The emulation segment of our business continues to grow at an impressive rate, with emulation product revenues for the quarter growing by over 70 percent versus the same period last year and by over 40 percent sequentially. This growth rate is several times the projected growth rate of the EDA industry, according to recent data published by Dataquest," he said.

Overall product revenues for the third quarter of fiscal 2000 were $13.9 million, up 25 percent from $11.1 million last year. Maintenance revenues increased 17 percent to $4.6 million, up from $3.9 million a year ago.

For the first nine months of fiscal 2000, revenues increased 26 percent to $50.7 million, compared with $40.0 million for the nine-month period of fiscal 1999. Net income for the first nine months of fiscal 2000 was $5.0 million, or $0.52 per diluted share, compared with $1.1 million, or $0.12 per diluted share, for the same period last year.

During the quarter, the company announced the introduction of its Vstation-5M (Verification Station) system. The Vstation-5M provides SoC design engineers with a better productivity tool for enhanced verification performance, as well as added flexibility in adapting to newer verification protocols. "This system is one of several new products we plan to launch in the coming months, as part of our long-term strategy to address a broad spectrum of verification methods," said Nunez.

About IKOS Systems

IKOS Systems, Inc. is a technology leader in high-performance design verification solutions including hardware and software simulation for language-based design, logic emulation for system integration and compatibility verification, and verification services. The Company's mission is to help customers realize their high complexity electronic systems through innovative design verification solutions. IKOS supports direct sales operation in North America, UK, France, Germany, Japan and India, and a distribution network throughout Asia-Pacific and Israel. The corporate headquarters are located at 19050 Pruneridge Ave., Cupertino, Calif., 95014, (408) 255-4567.

Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, without limitation, continued acceptance and development of the company's existing and new products, increased levels of competition for the company, new products and technological changes, the company's dependence upon third-party suppliers, intellectual property rights, and other risks detailed from time-to-time in the company's periodic reports filed with the Securities and Exchange Commission.

IKOS is a registered trademark of IKOS Systems. All other brand or product names may be trademarks or registered trademarks of their respective companies and should be treated as such.

IKOS SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

				July 1,	October 2,
				2000	1999
			ASSETS

Current assets:
Cash and cash equivalents....................................				$13,277	$7,664
Short-term investments............................................				4,026	2,870
Accounts receivable (net of allowances for
	doubtful accounts of $801 and $801, respectively)....			12,897	10,549
Inventories............................................................				3,735	3,455
Prepaid expenses and other assets...................				183	435
		Total current assets..........................................		34,118	24,973

Equipment and leasehold improvements
	Office and evaluation equipment.....................			6,543	5,663
	Machinery and equipment..................................			11,207	10,513
	Leasehold improvements..........................			844	718
				18,594	16,894
		Less allowances for depreciation and amortization..		(13,737)	(11,832)
				4,857	5,062
Intangible assets (net of amortization of
	$883 and $716, respectively).....................................			979	1,146
Other assets...................................................................				516	609
				$40,470	$31,790

		LIABILITIES AND STOCKHOLDERS' EQUITY


Accounts payable.............................................				$3,414	$3,763
Accrued payroll and related expenses......................				2,924	2,709
Accrued commissions......................................				1,016	1,052
Income taxes payable.................................................				2,399	1,019
Other accrued liabilities............................................				2,134	2,815
Deferred revenues................................................				7,784	5,337
		Total current liabilities.......................................		19,671	16,695

Accrued Rent.....................................................................				--	64
Commitments
Stockholders' equity:
Preferred stock, $.01 par value; 10,000 shares
	authorized, none issued and outstanding.......................			--	--
Common stock, $.01 par value; 50,000 shares
	authorized 8,797 and 8,797 shares,
	issued and 8,625 and 8,401 outstanding, respectively			88	88
Additional paid-in capital............................................				57,868	58,312
Treasury stock, at cost, 173 shares in 2000 and 396 in 1999..........................................................................				(1,115)	(2,536)
Accumulated other comprehensive income..................................				(747)	(498)
Accumulated deficit..................................................				(35,295)	(40,335)
		Total stockholders' equity.................................		20,799	15,031
				$40,470	$31,790

IKOS SYSTEMS INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)

			Three Months Ended		Nine Months Ended
			July 1,	July 3,	July 1,	July 3,
			2000	1999	2000	1999

Net Revenues
	Product..............		$13,876	$11,098	$37,328	$28,669
	Maintenance.......		4,567	3,914	13,319	11,369
		Total net revenues.......	18,443	15,012	50,647	40,038

Cost of revenues
	Product		2,834	2,681	7,995	7,121
	Maintenance		1,102	1,057	3,340	2,851
		Total cost of revenues	3,936	3,738	11,335	9,972
		Gross profit	14,507	11,274	39,312	30,066

Operating expenses:
	Research and development		4,198	3,411	11,405	9,859
	Sales and marketing		6,161	5,719	17,842	15,859
	General and administration		1,231	1,103	3,572	3,017
	Amortization of intangibles		42	103	167	309
		Total operating expenses	11,632	10,336	32,986	29,044
Income (loss) from operations			2,875	938	6,326	1,022

Other income (expense)
	Interest income		198	111	389	392
Income before provision for income taxes			3,073	1,049	6,715	1,414
Provision for income taxes			770	265	1,675	320
		Net income	$2,303	$784	$5,040	$1,094
Basic net income per share			$0.27	$0.09	$0.59	$0.13
	Common and Common equivalent shares used in computing basic per share amounts		8,611	8,288	8,520	8,285
Dilutive net income per share			$0.23	$0.08	$0.52	$0.12
	Common and common equivalent shares used in computing dilutive per share amounts		9,897	9,406	9,781	9,008