Cadence Reports Third Quarter Results

Earnings per Share $0.15 on Revenue of $327 Million

San Jose, Calif., October 15, 2002: Cadence Design Systems, Inc. (NYSE: CDN), the world's leading supplier of electronic design products and services, today announced third quarter pro forma diluted earnings per share of $0.15, down 30 percent from the third quarter of 2001, on revenue of $327 million. Cadence booked 60 percent of its product sales as subscription licenses during the quarter, compared with 49 percent for the comparable quarter in 2001. For the quarter, product revenue was $210 million, compared to $217 million in the third quarter of 2001. For comparative purposes, except where noted, the results discussed throughout this release reflect earnings before special charges, unusual items, amortization of acquired intangibles, and deferred stock compensation. Click here for the Consolidated Statements of Operations and Consolidated Balance Sheet.

"We are pleased with our solid results, especially in this challenging economy," said Ray Bingham, president and CEO of Cadence Design Systems. "Both the complexity of nanometer-scale design and the need for cost management are causing customers to revisit their approach to design--enabling Cadence to expand its role with existing and new customers. We have the most complete technology and services portfolio in the world, which allows customers to consolidate on fewer vendors, minimize integration costs, and solve the most difficult technology problems."

In accordance with generally accepted accounting principles (GAAP), the company reported net income of $8 million and diluted net income per share of $0.03 for the third quarter.

Business Highlights

Cadence's technology leadership position in both software and services across the full system-onto-chip-into-package-onto-board design spectrum is enabling it to expand its role as a preferred design partner for semiconductor and systems customers. This was exemplified by a significant expansion of the company's relationship with IBM, announced last month.

Demand has been especially strong for the Cadence® Encounter™ system, the company's single-architecture platform for nanometer-scale digital integrated circuit design. Encounter wins in the quarter included AMD, NEC Computers Division, and Samsung. Encounter bookings grew 70 percent sequentially.

"We continue to see evidence that the relationship we now have with customers like IBM is having an impact," said Bingham. "Our momentum shows in our results, and in our alliances. Our confidence in our business shows in the company's $100 million repurchase of shares in the quarter."

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after September 28, 2002.

The company expects to see strength in software--90 percent of its business--and continued weakness in services. Growth in product bookings for 2002 is expected to be in the range from 7 to 10 percent.

Cadence expects its subscription bookings, which going forward include subscription licenses and maintenance combined, to grow from 60 percent of the mix of product bookings in Q3 to between 70 and 80 percent going forward.

The company expects this increased mix of subscriptions will not affect bookings but will reduce revenue in the short-term. Cadence does not expect any meaningful recovery in the economy over the next year. The company will continue to aggressively manage its cost structure.

In Q4, Cadence expects earnings per share to be in the range of $0.14 to $0.16. For 2002, earnings per share are expected to be in the range of $0.75 to $0.77.

In 2003, Cadence expects earnings per share to be approximately $1.00.

The company expects that the change in mix of software licenses should enhance revenue visibility and, beginning in the second half of 2003, accelerate revenue and earnings growth.

All such expected earnings per share reflect earnings before unusual items, amortization of acquired intangibles, and deferred stock compensation.

About Cadence
Cadence is the world's largest supplier of electronic design technologies and services. Leading computer, networking, wireless, and consumer electronics companies use the company's solutions to design electronic systems and semiconductors down to nanometer scale. IEEE, the world's largest technical professional society, honored Cadence with its 2002 Corporate Innovation Recognition award. With approximately 5,600 employees and 2001 revenues of approximately $1.4 billion, Cadence has sales offices, design centers, and research facilities around the world. The company is headquartered in San Jose, Calif., and traded on the New York Stock Exchange under the symbol CDN. More information about the company, its products, and services is available at www.cadence.com.

The statements by Ray Bingham and the above statements contained in this Outlook are forward-looking statements based on current expectations or beliefs, as well as a number of 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 uncertainties and other factors, many of which are outside the control of Cadence, including among others:

Cadence's ability to compete successfully in the design automation product, commercial electronic design and methodology services industries; the mix of products and services sold and the timing of significant orders for its products; continuing economic uncertainty; fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries; and the acquisition of other companies or the failure to successfully integrate them. 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, 2001, and Quarterly Report on Form 10-Q for the period ended June 29, 2002.

In the calculation of the company's Earnings Before Goodwill (EBG) or pro forma earnings, Cadence excludes certain non-cash items such as amortization of goodwill and other acquired intangibles, amortization of deferred stock compensation and write-off of in-process R&D from acquisitions. Also excluded are non-operating and non-recurring items such as special charges, unusual items and restructure expenses. A reconciliation of EBG net income to GAAP net income is included in this press release and posted on the Cadence web site.

Cadence expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings Cadence may reiterate the Outlook published in this press release. At the same time, Cadence will keep this press release, including the Outlook, publicly available on its Web site. Prior to the start of the Quiet Period (described below), the public can continue to rely on the Outlook on the Web site as still being Cadence's current expectations on matters covered, unless Cadence publishes a notice stating otherwise.

Beginning December 13, 2002, Cadence will observe a "Quiet Period" during which the Outlook as provided in this press release and the company's quarterly report on Form 10-Q no longer constitute the company's current expectations. During the Quiet Period, the Outlook in these documents should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to update by the company. During the Quiet Period, Cadence representatives will not comment concerning Outlook or Cadence's financial results or expectations. The Quiet Period will extend until the day when Cadence's next quarterly Earnings Release is published, presently scheduled for January 21, 2003.

Cadence and the Cadence logo are registered trademarks of Cadence Design Systems, Inc.

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