Cadence Reports Q3 Revenue up 12% Over Q3 2004


Investors are encouraged to look at GAAP results as the best measure of financial performance. For example, amortization of intangibles or amortization of deferred compensation or in-process technology are important to consider because they may represent initial expenditures that under GAAP are reported across future fiscal periods. Likewise, deferred compensation expense is an obligation of the company that should be considered. Restructuring charges can be triggered by acquisitions or product adjustments as well as overall company performance within a given business environment. All of these metrics are important to financial performance generally.

Though Cadence management finds its non-GAAP measure useful in evaluating the performance of Cadence's business, its reliance on this measure is limited because items excluded from such measures often have a material effect on Cadence's earnings and earnings per share calculated in accordance with GAAP. Therefore, Cadence management typically uses its non-GAAP earnings and earnings per share measures, in conjunction with GAAP earnings and earnings per share measures, to address these limitations.

Cadence believes that presenting its non-GAAP measure of earnings and earnings per share provides investors with an additional tool for evaluating the performance of the company's business, which management uses in its own evaluation of performance, and an additional base line for assessing the future earnings potential of the company. While the GAAP results are more complete, the company prefers to allow investors to have this supplemental measure since, with reconciliation to GAAP, it may provide additional insight into our financial results.

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.

Prior to the start of the Quiet Period (described below), the public may continue to rely on the Business Outlook contained herein as still being Cadence's current expectations on matters covered unless Cadence publishes a notice stating otherwise.

Beginning Dec. 16, 2005, Cadence will observe a "Quiet Period" during which the Business Outlook as provided in this press release and the company's most recent annual report on Form 10-K and 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 on Cadence's business outlook or its financial results or expectations. The Quiet Period will extend until the day when Cadence's Fourth Quarter 2005 Earnings Release is published, currently scheduled for Feb. 1, 2006.

                     Cadence Design Systems, Inc.
                Condensed Consolidated Balance Sheets
                 October 1, 2005 and January 1, 2005
                            (In thousands)
                              (Unaudited)


                                               October 1,  January 1,
                                                   2005        2005
                                               ----------- -----------
Current Assets:
   Cash and cash equivalents                   $  618,770  $  448,517
   Short-term investments                          30,579     144,491
   Receivables, net of allowance for doubtful
    accounts of $13,326 and $12,734,
    respectively                                  277,117     384,114
   Inventories                                     26,365      20,481
   Prepaid expenses and other                      97,735      72,312
                                               ----------  ---------- 
      Total current assets                      1,050,566   1,069,915

Property, plant and equipment, net of
 accumulated depreciation of $533,148 and
 $498,424, respectively                           353,402     390,367
Goodwill                                        1,234,866     995,065
Acquired intangibles, net                         175,112     195,655
Installment contract receivables                   61,643      96,038
Other assets                                      238,959     242,799
                                               ----------  ---------- 
Total Assets                                   $3,114,548  $2,989,839
                                               ==========  ========== 

Current Liabilities:
   Accounts payable and accrued liabilities    $  236,392  $  277,992
   Current portion of deferred revenue            254,021     270,966
                                               ----------  ---------- 
      Total current liabilities                   490,413     548,958
                                                                         ----------    ----------  

Long-term  Liabilities:
      Long-term  portion  of  deferred  revenue                      19,535            20,847
      Convertible  notes                                                            420,000          420,000
      Other  long-term  liabilities                                        317,702          300,064
                                                                                              ----------    ----------
            Total  long-term  liabilities                                  757,237          740,911
                                                                                              ----------    ----------

Stockholders'  Equity                                                        1,866,898      1,699,970
                                                                                              ----------    ----------
Total  Liabilities  and  Stockholders'  Equity          $3,114,548    $2,989,839
                                                                                              ==========    ==========  


                                          Cadence  Design  Systems,  Inc.
                              Condensed  Consolidated  Income  Statements
                                For  the  Quarters  and  Nine  Months  Ended
                                    October  1,  2005  and  October  2,  2004
                              (In  thousands,  except  per  share  amounts)
                                                          (Unaudited)

                                                              Quarters  Ended            Nine  Months  Ended
                                                        --------------------  ---------------------
                                                        October  1,  October  2,October  1,  October  2,
                                                                2005            2004              2005            2004
                                                        ----------  ---------  ----------  ----------
Revenue:
    Product                                      $    218,559  $  183,030  $    593,812  $  503,053
    Services                                            31,684        34,447          93,513      104,064
    Maintenance                                      87,138        84,104        263,504      247,267
                                                        ----------  ---------  ----------  ---------

          Total  revenue                          337,381      301,581        950,829      854,384
                                                        ----------  ---------  ----------  ---------

Costs  and  Expenses:
    Cost  of  product                              18,537        25,033          62,631        58,590
    Cost  of  services                            22,944        23,132          68,715        69,526
    Cost  of  maintenance                      14,777        12,643          43,926        39,813
    Marketing  and  sales                      94,280        76,736        260,546      238,131
    Research  and  development            93,539        85,300        275,343      263,541
    General  and  administrative        29,962        23,620          92,078        63,749
    Amortization  of  acquired
      intangibles                                    13,912        12,741          39,200        44,672
    Deferred  compensation                  15,413          5,060          35,405        17,121
    Restructuring  and  other
      charges                                              3,782          1,036          34,785          9,400
    Write-off  of  acquired  in-
      process  technology                                -          2,000            9,400          9,000
                                                        ----------  ---------  ----------  ---------

          Total  costs  and
            expenses                                  307,146      267,301        922,029      813,543
                                                        ----------  ---------  ----------  ---------

              Income  from
                operations                            30,235        34,280          28,800        40,841

    Interest  expense                            (1,217)      (1,564)        (3,943)      (4,820)
    Other  income  (expense),
      net                                                      4,667        (4,181)        11,356      (13,960)
                                                        ----------  ---------  ----------  ---------

              Income  before
                provision  for  income
                taxes                                      33,685        28,535          36,213        22,061

    Provision  for  income  taxes        12,414          8,904          13,436          7,382
                                                        ----------  ---------  ----------  ---------

              Net  income                      $      21,271  $    19,631  $      22,777  $    14,679
                                                        ==========  =========  ==========  =========  


Basic  net  income  per  share    $          0.08  $        0.07  $          0.08  $        0.05
                                                        ==========  =========  ==========  =========  

Diluted  net  income  per  share$          0.07  $        0.07  $          0.08  $        0.05
                                                        ==========  =========  ==========  =========  

Weighted  average  common
  shares  outstanding  -  basic        281,222      270,509        277,474      271,514
                                                        ==========  =========  ==========  =========

Weighted  average  common
  shares  outstanding  -
  diluted                                              317,741      301,714        312,587      306,887
                                                        ==========  =========  ==========  =========

                                        Cadence  Design  Systems,  Inc.
                    Condensed  Consolidated  Statements  of  Cash  Flows
      For  the  Nine  Months  Ended  October  1,  2005  and    October  2,  2004
                                                      (In  thousands)
                                                        (Unaudited)

                                                                                                    Nine  Months  Ended
                                                                                                  ---------------------

                                                                                                  October  1,  October  2,
                                                                                                        2005              2004
                                                                                                  ----------  ----------

Cash  and  Cash  Equivalents  at  Beginning  of  Period  $  448,517    $  309,175
                                                                                                  ---------    ---------  
Cash  Flows  from  Operating  Activities:
    Net  income                                                                                22,777          14,679
    Adjustments  to  reconcile  net  income  to  net  cash
      provided  by  operating  activities:
        Depreciation  and  amortization                                    143,725        138,510
        Deferred  compensation                                                      35,405          17,121
        Equity  in  loss  from  investments,  net                          6,192          16,167
        Gain  on  investments,  net                                              (16,045)        (3,182)
        Write-down  of  investment  securities                          10,184            2,995
        Write-off  of  acquired  in-process  technology            9,400            9,000
        Non-cash  restructuring  and  other  charges                  2,179                    -
        Tax  benefits  from  employee  stock
          transactions                                                                        3,723                    -
        Tax  benefit  of  call  options                                            1,843                    -
        Deferred  income  taxes                                                      (5,369)                  -
        Proceeds  from  the  sale  of  receivables                    129,047          15,198
        Provisions  for  losses  on  trade  accounts
          receivable  and  sales  returns                                            569            2,168
        Other  non-cash  items                                                              (48)          1,008
        Changes  in  operating  assets  and  liabilities,
        net  of  effect  of  acquired  businesses:
            Receivables                                                                    123,076            6,411
            Inventories                                                                      (5,052)        (3,367)
            Prepaid  expenses  and  other                                      (17,042)        (4,470)
            Installment  contract  receivables                        (113,688)          6,514
            Other  assets                                                                    (1,873)          9,022
            Accounts  payable  and  accrued  liabilities          (49,132)      (22,846)
            Deferred  revenue                                                          (20,028)        13,295
            Other  long-term  liabilities                                    (10,232)        15,721
                                                                                                  ---------    ---------
              Net  cash  provided  by  operating  activities      249,611        233,944
                                                                                                  ---------    ---------

Cash  Flows  from  Investing  Activities:
    Proceeds  from  sale  of  available-for-sale
      securities                                                                              14,921            3,557
    Proceeds  from  sale  of  short-term  investments          289,225        413,935
    Purchases  of  short-term  investments                          (180,975)    (400,510)
    Proceeds  from  the  sale  of  long-term
      investments                                                                              6,033            6,942
    Proceeds  from  sale  of  property,  plant  and
      equipment                                                                                33,625            3,625
    Purchases  of  property,  plant  and  equipment              (49,954)      (46,788)
    Purchases  of  software  licenses                                            (500)            (757)
    Investment  in  venture  capital  partnerships  and
      equity  investments                                                              (9,184)      (17,353)
    Cash  paid  in  business  combinations  and  asset
      acquisitions,  net  of  cash  acquired                          (295,438)    (115,170)
                                                                                                  ---------    ---------
                Net  cash  used  for  investing  activities        (192,247)    (152,519)
                                                                                                  ---------    ---------

Cash  Flows  from  Financing  Activities:
    Principal  payments  on  capital  leases                                  (58)            (354)
    Payment  of  convertible  notes  issuance  costs                        -          (1,920)
    Proceeds  from  issuance  of  common  stock                      109,408          65,842
    Purchases  of  treasury  stock                                                        -        (94,103)
                                                                                                  ---------    ---------
                Net  cash  provided  by  (used  for)
                  financing  activities                                            109,350        (30,535)
                                                                                                  ---------    ---------

Effect  of  exchange  rate  changes  on  cash  and  cash
  equivalents                                                                                  3,539            1,567
                                                                                                  ---------    ---------

Increase  in  cash  and  cash  equivalents                            170,253          52,457
                                                                                                  ---------    ---------

Cash  and  Cash  Equivalents  at  End  of  Period              $  618,770    $  361,632
                                                                                                  =========    =========  

                                        Cadence  Design  Systems,  Inc.
                                              As  of  October  26,  2005
Impact  of  Non-GAAP  Adjustments  on  Forward  Looking  Diluted  Net  Income
                                                            Per  Share
                                                          (Unaudited)


                                                                            Quarter  ended          Year  ended
                                                                              December  31,        December  31,
                                                                                      2005                        2005
                                                                          ---------------  ----------------
                                                                                  Forecast                Forecast
                                                                          ---------------  ----------------

Diluted  net  income  per  share                    $0.17  to  $0.19    $0.25  to  $0.27
  on  a  GAAP  basis

      Amortization  of  acquired
        intangibles                                                        0.07                        0.34
      Deferred  compensation                                      0.02                        0.13
      Restructuring  and  other  charges                    -                            0.11
      Write-off  of  acquired  in-process
        technology                                                            -                            0.03
      Executive  severance  payments                          -                            0.02
      Integration  and  acquisition-
        related  costs                                                      -                            0.01

      Equity  in  losses  from
        investments,  gain  on
        Non-Qualified  Deferred
        Compensation  plan  assets                              0.01                        0.04
      Income  tax  effect  of  non-GAAP
        adjustments                                                          -                          (0.13)

                                                                          ---------------  ----------------
Diluted  net  income  per  share                    
  on  a  non-GAAP  basis                                    $0.27  to  $0.29    $0.80  to  $0.82
                                                                          ===============  ================

                                        Cadence  Design  Systems,  Inc.
                                              As  of  October  26,  2005
        Impact  of  Non-GAAP  Adjustments  on  Forward  Looking  Net  Income
                                                          (Unaudited)


                                                                            Quarter  ended          Year  ended
                                                                              December  31,        December  31,
                                                                                      2005                        2005
                                                                          ---------------  ----------------
($  in  Millions)                                                    Forecast                Forecast
                                                                          ---------------  ----------------

Net  income  on  a  GAAP  basis                            $54  to  $60            $77  to  $83

      Amortization  of  acquired
        intangibles                                                          21                          106
      Deferred  compensation                                          8                            43
      Restructuring  and  other  charges                      -                            35
      Write-off  of  acquired
        in-process  technology                                        -                              9
      Executive  severance  payments                            -                              8
      Integration  and  acquisition-
        related  costs                                                        1                              4
      Equity  in  losses  from
        investments,  gain  on
        Non-Qualified
      Deferred  Compensation
        plan  assets                                                            2                            14
      Income  tax  effect  of  non-GAAP
        adjustments                                                            1                          (44)

                                                                          ---------------  ----------------
Net  income  on  a  non-GAAP  basis                    $87  to  $93          $252  to  $258
                                                                          ===============  ================

                                          Cadence  Design  Systems,  Inc.
                                                          (Unaudited)


Revenue  Mix  by  Geography  (%  of  Total  Revenue)

                                                            2003                                          2004
                                        -------------------------  ------------------------
GEOGRAPHY                          Q1      Q2      Q3      Q4    Year      Q1      Q2    Q3      Q4    Year
---------------------------------------------  ------------------------

  North  America                55%    54%    59%    64%    58%      53%    57%  56%    45%    52%
  Europe                              17%    15%    19%    16%    17%      16%    19%  20%    30%    22%
  Japan                                20%    22%    13%    13%    17%      22%    14%  15%    14%    16%
  Asia                                    8%      9%      9%      7%      8%        9%    10%    9%    11%    10%
Total                                100%  100%  100%  100%  100%    100%  100%100%  100%  100%



Revenue  Mix  by  Geography  (%  of  Total  Revenue)

                                                    2005
                                        ----------------
GEOGRAPHY                          Q1      Q2      Q3
------------------------------------

  North  America                46%    49%    53%
  Europe                              16%    17%    21%
  Japan                                30%    25%    20%
  Asia                                    8%      9%      6%
Total                                100%  100%  100%



Revenue  Mix  by  Product  Group  (%  of  Total  Revenue)

                                                            2003                                          2004
                                        -------------------------  ------------------------
PRODUCT  GROUP                  Q1      Q2      Q3      Q4    Year      Q1      Q2    Q3      Q4    Year
---------------------------------------------  ------------------------

  Functional
    Verification                20%    18%    18%    20%    19%      20%    20%  18%    19%    19%
  Digital  IC  Design        24%    22%    27%    20%    23%      25%    21%  24%    27%    24%
  Custom  IC  Design          27%    28%    27%    27%    27%      27%    24%  27%    27%    27%
  Design  for
    Manufacturing                9%    10%      7%    13%    10%        6%      9%  12%      8%      9%
  System  Interconnect      8%      9%      8%    10%      9%      10%      9%    8%      9%      9%
  Services  &  Other          12%    13%    13%    10%    12%      12%    17%  11%    10%    12%
Total                                100%  100%  100%  100%  100%    100%  100%100%  100%  100%



Revenue  Mix  by  Product  Group  (%  of  Total  Revenue)

                                                    2005
                                        ----------------
PRODUCT  GROUP                  Q1      Q2      Q3
------------------------------------

  Functional
    Verification                20%    19%    21%
  Digital  IC  Design        26%    23%    26%
  Custom  IC  Design          24%    31%    27%
  Design  for
    Manufacturing                9%      9%      9%
  System  Interconnect    10%      9%      8%
  Services  &  Other          11%      9%      9%
Total                                100%  100%  100%


Note:  Product  Group  total  revenue  includes  Product  +  Maintenance
 





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