Icahn Issues Open Letter to Shareholders of Mentor Graphics

NEW YORK, April 21, 2011 — (PRNewswire) —

Carl C. Icahn today issued the following open letter to shareholders of Mentor Graphics Corporation:

Dear Fellow Shareholders:

It is time for a change on the Board of Directors of Mentor Graphics. For the first time, shareholders of Mentor Graphics are being presented with an opportunity to elect directors not nominated by the entrenched Board. Eight years have passed without a single director joining or leaving. All three of the directors we seek to replace have been on the Board since 1994, just after Walden Rhines became CEO. One of the directors we seek to replace is actually the lead independent director, despite spending over 17 years on the Board with the CEO and the President. Mentor's stock is now at approximately the same level as it was in 1994 while CEO Walden Rhines received $65 million in compensation.(i) This Board has failed to hold management accountable to shareholders in our opinion. Shareholders can send a strong signal to this entrenched Board by electing our three nominees.

Our plan is not limited to a sale of the Company. We have a clear plan to improve earnings per share through improved oversight in two key areas where over the past 17 years this Board has allowed for a bloated expense structure and massive share dilution:

(1) SG&A growth in excess of Total Revenue growth; and (2) Dilution.

Since 1994, Mentor's annualized revenue growth was 5.3% while its annualized SG&A growth was 5.7%. This has led SG&A as a percentage of Total Revenues to increase to 46%. This is quite unfortunate for shareholders, as with 5.3% annualized revenue growth it seems absurd to us that Mentor could not better leverage its SG&A expenses.

FY 1994

FY 2011

Total Revenues



Marketing and Selling



General and Administration



Total SG&A Expenses



Annualized Revenue Growth


Annualized SG&A Growth


SG&A % of Total Revenues



Even today, Mentor's SG&A as a percentage of Revenues is significantly higher than its closest peers. We believe that Cadence's ratio of SG&A as a percentage of Revenues would be lower if it was not still undergoing the effects of a transition from a term based model to a ratable model that temporarily lowers revenues. Even Magma Design Automation, a competitor of Mentor Graphics with just $135M of Revenues, has roughly the same ratio of SG&A as a percentage of Revenues.





Total Revenues








SG&A as a % of Revenues




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