Synopsys Posts Financial Results for First Quarter of Fiscal 2006

In connection with this earnings release, Synopsys is making available to investors supplemental financial information which can be found on Synopsys' website at Synopsys currently intends to provide this information on a quarterly basis.

Earnings Call Open to Investors

    Synopsys will hold a conference call for financial analysts and investors
today at 2:00 p.m., Pacific Time.  A live webcast of the call will be
available at Synopsys' corporate website at  A recording of the call
will be available by calling 1-800-475-6701 (320-365-3844 for international
callers), access code 816786, beginning at 5:30 p.m. Pacific Time today.  A
webcast replay will also be available at from approximately 5:30
p.m. Pacific Time today through to the time Synopsys announces its results for
the second quarter of fiscal 2006 in May 2006.  In addition, Synopsys will
post copies of the prepared remarks of Aart de Geus, chairman and chief
executive officer, and Brian Beattie, chief financial officer, on its website
at following the call.

Effectiveness of Information

The targets included in this release, the statements made during the earnings conference call and the information contained in the financial supplement represent Synopsys' expectations and beliefs as of the date of this release only. Although this press release, copies of the prepared remarks of the chief executive officer and chief financial officer made during the call and the financial supplement will remain available on Synopsys' website through the date of the second quarter earnings call in May 2006, their continued availability through such date does not mean that Synopsys is reaffirming or confirming their continued validity. Synopsys does not currently intend to report on its progress during the second quarter of fiscal 2006 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release until it releases such results in May 2006.

Availability of Final Financial Statements

Synopsys will include final financial statements for the first quarter of fiscal 2006 in its Quarterly Report on Form 10-Q to be filed in March 2006.

About Synopsys

Synopsys, Inc. (NASDAQ: SNPS) is a world leader in electronic design automation (EDA) software for semiconductor design. The company delivers technology-leading semiconductor design and verification platforms and IC manufacturing software products to the global electronics market, enabling the development and production of complex systems-on-chips. Synopsys also provides intellectual property and design services to simplify the design process and accelerate time-to-market for its customers. Synopsys is headquartered in Mountain View, California and has offices in more than 60 locations throughout North America, Europe, Japan and Asia. Visit Synopsys online at

Forward-Looking Statements

The statements made in this press release regarding projected financial results in the sections entitled "Financial Targets," and "GAAP Reconciliation - Reconciliation of Estimated Target Operating Results" and certain statements made in the earnings conference call are forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those described by these statements due to a number of uncertainties, including, but not limited to:

* weakness or continued budgetary caution in the semiconductor or

electronics industries;

* lower-than-expected research and development spending by semiconductor

and electronic systems companies;

* competition in the market for Synopsys' products and services;

* lower-than-anticipated new IC design starts;

* lower-than-anticipated purchases or delays in purchases of software or

consulting services by Synopsys' customers, including delays in the

renewal, or non-renewal, of Synopsys' license arrangements with major


* unexpected changes in the mix of time-based licenses and upfront


* lower-than-expected bookings of licenses on which revenue is recognized


* failure of our cost control efforts to result in the anticipated


* failure to continue to improve Synopsys' existing products;

* failure to successfully develop additional intellectual property blocks

for its IP business or to develop and integrate its design for

manufacturing products;

* difficulties in the integration of the products and operations of

acquired companies or assets into Synopsys' products and operations;

* downward pressure on maintenance orders, adversely affecting Synopsys'

future level of service revenue; and

* changes in the anticipated amount of stock-based compensation

recognized on the Company's financial statements.

In addition, Synopsys' actual operating expenses and earnings per share on a GAAP basis for the fiscal quarter ending April 30, 2006 and actual earnings per share and operating cash flow on a GAAP basis for fiscal year 2006 could differ materially from the targets stated under "Financial Targets" above for a number of reasons, including (i) a determination by Synopsys that any portion of its intangible assets have become impaired, (ii) application of the actual consolidated GAAP tax rate for such periods, (iii) integration and other acquisition-related expenses, amortization of additional intangible assets associated with future acquisitions, if any, (iv) increases or decreases in stock-based compensation expense caused by employee termination or otherwise, and (vi) increases or decreases to estimated capital expenditures.

For further discussion of these and other factors that may cause results to differ from those projected in this release, readers are referred to the reports which Synopsys has filed with the Securities and Exchange Commission (SEC), and which are available at, particularly the information contained in the section of Part II, Item 7 of Synopsys' Annual Report on Form 10-K for the fiscal year ended October 31, 2005 filed with the SEC on January 12, 2006 entitled "Factors That May Affect Future Results." Synopsys is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call or the financial supplement whether as a result of new information, future events or otherwise, unless otherwise required by law.

    NOTE:  Synopsys is a registered trademark of Synopsys, Inc.  Any other
trademarks mentioned in this release are the intellectual property of their
respective owners.

     Lisa L. Ewbank
     Synopsys, Inc.

     Yvette Huygen
     Synopsys, Inc.

                                SYNOPSYS, INC.
        Unaudited Condensed Consolidated Statements of Operations (1)
                    (in thousands, except per share data)

                          Three Months Ended           Three  Months  Ended
                                                      January  31,  2006                      January  31,  2005
                                                            Adjust-        Non-                          Adjust-          Non-
                                            GAAP        ments(2)      GAAP          GAAP        ments(2)        GAAP
              license          $211,110              --    $211,110    $186,284              --    $186,284
              license                8,367              --          8,367        10,798              --        10,798
              and  Service      40,712              --        40,712        44,222              --        44,222
                  revenue        260,189              --      260,189      241,304              --      241,304
        Cost  of  revenue:
            License                29,989      (1,619)      28,370        24,847              --        24,847
              and  service      16,573          (856)      15,717        17,029              --        17,029
              of  intangible
              assets                  8,659      (8,659)              --        28,099    (28,099)              --
                Total  cost
                  of  revenue    55,221    (11,134)      44,087        69,975    (28,099)      41,876
            Gross  margin    204,968      11,134      216,102      171,329      28,099      199,428
        Operating  expenses:
            Research  and
              development      87,604      (8,149)      79,455        72,917              --        72,917
            Sales  and
              marketing          77,189      (4,709)      72,480        83,990              --        83,990
            General  and
              istrative          29,804      (3,097)      26,707        24,223              --        24,223
              research  and
              development            800          (800)              --          5,700      (5,700)              --
              of  intangible
              assets                  7,340      (7,340)              --          8,852      (8,852)              --
                  expenses      202,737    (24,095)    178,642      195,682    (14,552)    181,130
              income  (loss)    2,231      35,229        37,460    (24,353)      42,651        18,298
            Other  income,
              net                            795              --              795          5,199              --          5,199
        Income  (loss)
          before  provision
          (benefit)  for
          income  taxes          3,026      35,229        38,255    (19,154)      42,651        23,497
          (benefit)  for
          income  taxes          1,329      10,530        11,859      (4,829)      13,638          8,809
        Net  income
          (loss)                    $1,697    $24,699      $26,396  $(14,325)    $29,013      $14,688

        Net  income  (loss)  per  share:
              Basic                    $0.01                            $0.18      $(0.10)                            $0.10
              Diluted                $0.01                            $0.18      $(0.10)                            $0.10

        Shared  used  in  computing  per  share  amounts:
              Basic                144,989                        144,989      146,060                        146,060
              Diluted            146,969                        146,969      146,060                        146,998

        (1)  Synopsys'  first  quarter  ends  on  the  Saturday  nearest  to  January  31.
                For  presentation  purposes,  the  Unaudited  Condensed  Consolidated
                Statements  of  Operations  refer  to  a  calendar  month  end.

        (2)  Adjustments  consist  of  stock-based  compensation  and  related  tax  effect
                under  FAS  123(R)  and  to  the  extent  incurred  amortization  of  intangible
                assets,  in-process  research  and  development  charges,  integration  and
                other  significant  items,  which  in  the  opinion  of  management  are
                extraordinary.Pre-tax  income  for  the  first  fiscal  quarter  of  2006
                includes  total  stock-based  compensation  of  $18.4  million  as  follows:
                cost  of  revenue  $2.5  million;  research  &  development  $8.1  million;
                sales  &  marketing  $4.7  million;  general  &  administrative  $3.1  million.
                As  of  January  31,  2005  no  stock-based  compensation  was  recorded  under
                FAS  123(R).

                                                                SYNOPSYS,  INC.
                          Unaudited  Condensed  Consolidated  Balance  Sheets  (1)
                                              (in  thousands,  except  Par  value)

                                                                                              January  31,          October  31,
                                                                                                  2006  (2)                  2005
        Current  assets:
            Cash  and  cash  equivalents                                  $314,498                $404,436
            Short-term  investments                                          199,787                  182,070
            Total  cash,  cash  equivalents  and
              short-term  investments                                        514,285                  586,506
            Accounts  receivable,  net                                        83,997                  100,178
            Deferred  income  taxes                                            197,110                  195,501
            Income  taxes  receivable                                          48,224                    48,370
            Prepaid  expenses  and  other  current
              assets                                                                          24,808                    16,924
                            Total  current  assets                              868,424                  947,479
        Property  and  equipment,  net                                    165,116                  170,195
        Long-term  investments                                                    8,322                      8,092
        Goodwill,  net                                                                744,114                  728,979
        Intangible  assets,  net                                              135,570                  142,519
        Long-term  deferred  income  taxes                              83,232                    82,384
        Other  assets                                                                    65,253                    61,828
                              Total  assets                                      $2,070,031            $2,141,476

        Current  liabilities:
            Accounts  payable  and  accrued
              liabilities                                                            $146,477                $231,359
            Accrued  income  taxes                                              171,775                  169,632
            Deferred  revenue                                                      475,962                  415,689
                              Total  current  liabilities                  794,214                  816,680
        Deferred  compensation  and  other
          liabilities                                                                    68,360                    63,841
        Long-term  deferred  revenue                                        37,600                    42,019
        Stockholders'  equity:
            Preferred  stock,  $0.01  par  value;
              2,000  shares  authorized;  none
              outstanding                                                                        --                            --
            Common  stock,    $0.01  par  value  per
              share;  400,000  shares  authorized;
              142,680  and  145,897  shares  outstanding,
              respectively                                                                1,427                      1,459
            Capital  in  excess  of  par  value                      1,280,329              1,263,952
            Retained  earnings                                                    171,559                  171,108
            Treasury  stock,  at  cost;  14,477  and
              11,259  shares,  respectively                            (268,800)              (199,482)
            Deferred  stock  compensation                                          --                    (2,100)
            Accumulated  other  comprehensive  loss              (14,658)                (16,001)
                          Total  stockholders'  equity                1,169,857              1,218,936
                          Total  liabilities  and
                            stockholders'  equity                        $2,070,031            $2,141,476

        (1)  The  Company's  first  quarter  and  fiscal  year  ends  on  the  Saturday
                nearest  to  January  31  and  October  31,  respectively.    For  presentation
                purposes,  the  Unaudited  Condensed  Consolidated  Balance  Sheets  refer  to
                a  calendar  month  end.

        (2)  During  the  quarter,  Synopsys  completed  the  acquisition  of  HPL
                Technologies,  Inc.,  and  has  performed  a  preliminary  valuation  of  the
                tangible  and  identifiable  intangible  assets  and  liabilities.  The
                Company  expects  to  complete  the  valuation  during  its  second  fiscal

                                                                SYNOPSYS,  INC.
                Unaudited  Condensed  Consolidated  Statements  of  Cash  Flows  (1)
                                                                (in  thousands)

                                                                                                Three  Months  Ended  January  31,
                                                                                                    2006                                2005
        Net  income  (loss)                                                              $1,697                    $(14,552)
        Adjustments  to  reconcile  net  income
          (loss)  to  net  cash  provided  by
          operating  activities:
              Amortization  and  depreciation                                29,729                        50,482
              Stock-based  compensation                                          18,430                                --
              In-process  research  and  development                          800                          5,700
              Deferred  income  taxes                                                      (52)                      (7,723)
              Write-down  of  long-term  assets                                      --                          1,568
              Provision  for  (reduction  to)  doubtful
                accounts                                                                                --                            (720)
              Net  change  in  unrecognized  gains  and
                losses  on  foreign  exchange  contracts                      272                        (3,789)
              Gain  (loss)  on  sale  of  short  and  long-term
                investments                                                                          14                                30

              Net  changes  in  operating  assets  and
                liabilities  net  of  acquired  assets
                and  liabilities:
                      Accounts  receivable                                            17,203                        31,480
                      Income  taxes  receivable                                            --                                61
                      Prepaid  expenses  and  other  current
                        assets                                                                    (7,607)                        2,544
                      Other  assets                                                          (3,425)                      (6,051)
                      Accounts  payable  and  accrued
                        liabilities                                                        (93,130)                    (32,909)
                      Accrued  income  taxes                                          (2,775)                        2,062
                      Deferred  revenue                                                  54,745                      107,129
                      Deferred  compensation  and  other
                        liabilities                                                            3,900                          6,763
              Net  cash  provided  by  operating
                activities                                                                    19,801                      142,075

              Cash  paid  for  acquisitions,  net  of
                cash  received                                                            (11,894)                    (91,293)
              Proceeds  from  sales  and  maturities  of
                short-term  investments                                            84,671                        97,114
              Purchases  of  short-term  investments                (102,453)                    (71,538)
              Purchases  of  long-term  investments                      (1,539)                              --
              Purchases  of  property  and  equipment                    (7,539)                      (6,330)
              Capitalization  of  software
                development  costs                                                          (762)                          (738)
              Net  cash  used  in  investing  activities              (39,516)                    (72,785)

              Issuances  of  common  stock                                        10,433                          2,268
              Purchases  of  treasury  stock                                  (80,982)                    (40,160)
              Net  cash  used  in  financing  activities              (70,549)                    (37,892)
              Effect  of  exchange  rate  changes  on
                cash  and  cash  equivalents                                            326                        (1,740)
              Net  (decrease)  increase  in  cash  and
                cash  equivalents                                                      (89,938)                      29,658
              Cash  and  cash  equivalents,  beginning
                of  period                                                                    404,436                      346,709
              Cash  and  cash  equivalents,  end  of
                period                                                                        $314,498                    $376,367

        (1)  Synopsys'  first  quarter  ends  on  the  Saturday  nearest  to  January  31.
                For  presentation  purposes,  the  Unaudited  Condensed  Consolidated
                Statements  of  Cash  Flows  refer  to  a  calendar  month  end.


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