Cadence Announces Preliminary Fourth Quarter Results.

Business Editors

SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 2, 2003

Cadence Design Systems, Inc. (NYSE:CDN) today announced that fourth-quarter 2002 revenue will be in the range of $272 million to $278 million, due to a greater percentage of subscription-license product bookings than expected. Subscription licenses accounted for approximately 83 percent of product bookings vs. 60 percent in the prior quarter. Total product bookings are expected to increase slightly in the fourth quarter over the prior-year quarter.

Fourth-quarter pro forma diluted earnings per share are expected to be approximately $0.02 to $0.04 before special charges, unusual items and amortization of acquired intangibles.

During the quarter, the company continued to streamline for operational efficiency and rationalize product lines. This resulted in a restructuring charge of approximately $70 million, which is composed of severance, facilities closures and related asset write-offs. Cadence also received $265 million cash in the quarter from the settlement of the Avant! litigation. Amortization of intangibles was approximately $30 million. In accordance with generally accepted accounting principles (GAAP), the company expects to report net income of $88 million to $95 million and diluted net income per share of $0.32 to $0.34 for the fourth quarter.

Cadence cautioned that these anticipated results are preliminary, based on the best information currently available, and are subject to the final closing of its books and customary accounting procedures. Cadence will report its full results for the fourth quarter and the year 2002, and will provide additional guidance for 2003, on January 21, 2003.

Business Outlook

For 2003, the company expects product bookings to be approximately flat year-over-year, with subscription bookings expected to be 80 percent to 90 percent of total product bookings. The average product contract duration is expected to increase from 2.5 years to 3 years. These factors, combined with the cost savings implemented in the fourth-quarter restructuring, lead to expected pro forma EPS in 2003 of between $0.50 and $0.55. The expected earnings per share for 2003 reflect earnings before unusual items, amortization of acquired intangibles, and deferred stock compensation.

Audio Webcast Scheduled

Ray Bingham, chief executive officer, and Bill Porter, chief financial officer, Cadence Design Systems, Inc., will host a Preliminary Fourth Quarter 2002 Financial Results Audio Webcast today, January 2, 2003, at 2:00 p.m. (Pacific) / 5:00 p.m. (Eastern). Please access the website to register at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting January 2 at 5:30 p.m. Pacific time and end at 5:30 p.m. on January 9.

Webcast access: http://www.cadence.com/company/investor_relations

About Cadence

Cadence is the largest supplier of electronic design technologies, methodology services, and design services. Cadence solutions are used to accelerate and manage the design of semiconductors, computer systems, networking and telecommunications equipment, consumer electronics, and a variety of other electronics-based products. With approximately 5,200 employees and 2002 revenues of approximately $1.3 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 are available at www.cadence.com.

Note to Editors: Cadence and the Cadence logo are registered trademarks of Cadence Design Systems, Inc.

The statements contained above regarding the company's fourth-quarter 2002 results and those contained in the Business Outlook section above are 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 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 and the commercial electronic design and methodology

services industries; the mix of products and services sold and the

timing of significant orders for its products; recent 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 September 28, 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 unusual items and restructure expenses.

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 Business 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 (www.cadence.com/company/investor_relations/index.html).

The public can continue to rely on the Business Outlook herein as still being Cadence's current expectations on matters covered, until the release of Cadence's 2002 earnings, currently scheduled for January 21, 2003, or unless Cadence publishes a notice before then stating otherwise.

Beginning March 14, 2003, Cadence will observe a "Quiet Period" during which the Business Outlook as provided in this press release, the release of Cadence's 2002 earnings, currently scheduled for January 21, 2003, and the company's most recent quarterly report on Form 10-Q no longer constitute the company's current expectations. During the Quiet Period, the Business 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 the 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 April 15, 2003.