Mentor Graphics Reports First Quarter Earnings

WILSONVILLE, Ore., April 24, 2003 - Mentor Graphics Corporation (Nasdaq: MENT) today reported first quarter 2003 earnings-per-share of $.11, before amortization of acquired intangibles and special charges, on revenues of $159.3 million.  GAAP earnings-per-share were $.05.  Total bookings rose 33 percent over the first quarter of 2002, to a new record for first quarter bookings.  Revenues were also at record levels for a first quarter, up 25 percent from the year ago quarter.

"Our systems and deep submicron businesses were very strong in the quarter," said Walden C. Rhines, chairman and CEO of Mentor Graphics.  "Based on the performance of the business, we believe Mentor continued to grow market share in the first quarter, on top of strong growth last year.  Mentor's most recently reported market share reached new heights as it crossed 20 percent, according to recently released fourth quarter 2002 Electronic Design Automation Consortium reports."

Strength in the quarter was broad-based, led by the systems design business.  Systems design bookings were nearly triple the first quarter of 2002, while revenue climbed 80 percent.  Systems design strength was across all geographic regions.  High-speed printed circuit board design tool bookings more than tripled.  The cabling and wire harness business reported bookings up 20 percent.

Deep submicron products also performed well in the quarter, led by strength in the Calibre product family.  Calibre bookings were up 50 percent.  The increasing complexity of analog/mixed-signal designs continues to drive customers to retool into Mentor's new analog/mixed signal design flow, announced last year.  The strength in analog/mixed-signal has continued into the second quarter, as several key orders have already been booked.

"As we predicted in our fourth quarter 2002 conference call, the first quarter exhibited strong year over year growth," said Gregory K. Hinckley, president of Mentor Graphics.  "The systems business and the deep submicron businesses were particularly strong, but growth was broad-based and seen in all geographic regions.  While we are obviously pleased with the outcome of this quarter, we remain cautious given the state of the global electronics market."

Mentor continued its strategy of using its broad distribution network to seed its products, gaining 116 new customers in the quarter, excluding telesales products in embedded systems and systems design.

Revenue by region was 50 percent North America, 25 percent Europe, 15 percent Japan and 10 percent Pacific Rim.  By region, bookings growth in Japan and Europe were the strongest year over year, at about 65 percent and 45 percent respectively.  North American bookings grew about 15 percent over the year ago quarter, with the Pacific Rim up about 5 percent on top of its strong growth reported in the first quarter of 2002.  The move from distributor to direct sales in China, which Mentor undertook last year, began to pay off with significant IC and systems orders from top Chinese companies in the quarter and more expected in the second quarter.

Special charges were primarily restructuring related.

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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 world's most successful electronics and semiconductor companies. Established in 1981, the company reported revenues over the last 12 months of about $600 million and employs approximately 3,500 people worldwide.  Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777; Silicon Valley headquarters are located at 1001 Ridder Park Drive, San Jose, California 95131-2314. World Wide Web site: www.mentor.com.

In the calculation of earnings, gross margin and operating expenses before amortization of acquired intangibles and special charges, Mentor Graphics excludes amortization of acquired intangibles and write-offs of in-process R&D from acquisitions.  Also excluded are non-operating and non-recurring items classified as special charges such as restructure expenses and asset impairments.  Mentor Graphics believes that excluding these items provides investors with a representation of its core performance, and a pro forma base line for assessing the future earnings potential of Mentor Graphics.

Mentor Graphics 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 Company's outlook for future periods constitute "forward-looking" statements 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) the Company's ability to continue selling products and services during the continuing severe slowdown in the electronics industry, particularly in the telecommunications, semiconductor and personal computer segments; (ii) the Company's ability to manage expenses during the current very severe slowdown in the electronics industry; (iii) the overall instability of diverse economies, including changes in regional or worldwide economic or political conditions, government trade restrictions, or war in the Middle East or elsewhere (iv) changes in accounting or reporting rules or interpretations, changes in the tax environment worldwide, limitations on repatriation of earnings, licensing and intellectual property rights protection; (v) the Company's ability to successfully integrate and manage its recent and future acquisitions; (vi) the completion of customer contracts and the terms of delivery of software, hardware and other services; (vii) the Company's ability to successfully offer products and services that compete in the highly competitive and dynamic EDA industry including the risk that the Company's technology, products or inventory become obsolete; (viii) effects of the increasing volatility of foreign currency fluctuations on the Company's business and operating results, and (ix) effects of unanticipated shifts in product mix on gross margin and unanticipated shifts in geographic mix on the overall tax rate, all as may be discussed in more detail under the heading "Factors That May Affect Future Results and Financial Condition" 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 outlook 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.