Press Releases

Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2006
PRNewswire-FirstCall
MOUNTAIN VIEW, Calif.

Synopsys, Inc. (NASDAQ: SNPS), a world leader in semiconductor design software, today reported results for its fourth quarter and fiscal year ended October 31, 2006.

For the fourth quarter, Synopsys reported revenue of $283.4 million, an 11 percent increase compared to $254.8 million for the fourth quarter of fiscal 2005. Revenue for fiscal year 2006 was $1.096 billion, an increase of 10.4 percent from the $991.9 million in fiscal 2005.

"In 2006 we delivered strong revenue and earnings growth, solid cash flow and business that was notably above plan. As a result of our technology leadership we are seeing increased momentum in customer adoptions and new products," said Aart de Geus, chairman and CEO of Synopsys. "For fiscal 2007 we are committed to reaching a 20 percent-plus operating margin by the second half of the year. Beyond 2007, we expect to drive revenue growth and expense control to achieve our next target operating margin in the mid to high 20s."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal 2006 was $9.6 million, or $0.07 per share, compared to net loss of ($13.5) million, or ($0.09) per share, for the fourth quarter of fiscal 2005. GAAP net income for the current period includes employee stock-based compensation expense of $15.1 million due to the adoption of Statement of Financial Accounting Standards 123( R ) (FAS 123( R )) in fiscal 2006.

GAAP net income for the fiscal year ended October 31, 2006 was $24.3 million, or $0.17 per share, compared to net loss of ($15.5) million, or ($0.11) per share, for fiscal 2005. GAAP net income for fiscal year 2006 includes employee stock-based compensation expense of $63.0 million due to the adoption of FAS 123( R ) in fiscal 2006.

Net income prior to fiscal 2006 did not include employee stock-based compensation expense related to FAS 123( R ).

Non-GAAP Results

On a non-GAAP basis, net income for the fourth quarter of fiscal 2006 was $30.1 million, or $0.21 per share, compared to non-GAAP net income of $15.3 million, or $0.10 per share, for the fourth quarter of fiscal 2005.

Non-GAAP net income for the fiscal year ended October 31, 2006 was $111.2 million, or $0.77 per share, compared to $58.1 million, or $0.40 per share, for fiscal year 2005.

Non-GAAP net income consists of GAAP net income excluding employee stock- based compensation expense calculated in accordance with FAS 123( R ) and, to the extent incurred in a particular quarter or period, amortization of intangible assets, in-process research and development charges, integration and other acquisition-related expenses, facilities and workforce realignment charges, and other significant items which, in the opinion of management, are infrequent or non-recurring. See "GAAP Reconciliation" below.

Financial Targets

Synopsys also announced its operating model targets for the first quarter and full fiscal year 2007. These targets constitute forward-looking information and are based on current expectations. They do not include any potential impact due to adoption of Staff Accounting Bulletin No. 108, which we will be required to adopt during 2007. For a discussion of factors that could cause actual results to differ materially from these targets, see "Forward-Looking Statements" below.

  First Quarter of Fiscal 2007 Targets:

  -- Revenue: $292 million - $300 million
  -- GAAP expenses: $267 million - $283 million
  -- Non-GAAP expenses: $241 million - $251 million
  -- Other income and expense: $0 million - $4 million
  -- Fully diluted outstanding shares: 141 million - 147 million
  -- Tax rate applied in non-GAAP net income calculations: 28 - 29 percent
  -- GAAP earnings per share: $0.10 - $0.15
  -- Non-GAAP earnings per share: $0.26 - $0.28
  -- Revenue from backlog: more than 90 percent

  Note: Q107 includes an extra fiscal week that occurs every seven years.

  Full-Year Fiscal Year 2007 Targets

  -- Revenue: $1.180 billion - $1.205 billion
  -- Fully diluted outstanding shares: 142 million - 148 million
  -- Tax rate applied in non-GAAP net income calculations: 28 - 29 percent
  -- GAAP earnings per share: $0.60 - $0.73
  -- Non-GAAP earnings per share: $1.20 - $1.28
  -- Cash flow from operations: greater than $275 million

  GAAP Reconciliation

Synopsys' management evaluates and makes decisions about the Company's business operations primarily based on the bookings, revenue and direct, ongoing and recurring costs of those operations. Management does not believe amortization of intangible assets, in-process research and development charges, integration and other acquisition-related expenses, facilities and workforce realignment charges and other significant infrequent items are ongoing and recurring operating costs of its core software, intellectual property and service business operations. In addition, while employee stock- based compensation expense calculated in accordance with FAS 123( R ) and change in the fair value of the Company's non-qualified deferred plan compensation plan obligations constitute ongoing and recurring expenses of the Company, such expenses are excluded from non-GAAP results because they are not expenses that require cash settlement by the Company and because such expenses are not used by management to assess the core profitability of the Company's business operations. Therefore, management excludes such costs, to the extent incurred in a particular quarter, from the following GAAP financial measures included in this earnings release: total cost of revenue, gross margin, total operating expenses, operating income (loss), income (loss) before provision (benefit) for income taxes, provision (benefit) for income taxes, net income (loss) and net income (loss) per share.

For each such measure, excluding these costs provides management with more consistent, comparable information about the Company's core profitability. For example, since the Company does not acquire businesses on a predictable cycle, management would have difficulty evaluating the Company's profitability as measured by gross margin, operating margin, income before taxes and net income on a period-to-period basis unless it excluded acquisition-related charges. Similarly, the Company does not undertake significant restructuring or realignments on a regular basis, and, as a result, excludes associated charges in order to enable better and more consistent evaluations of the Company's operating expenses before and after such actions are taken. Management also uses these measures to help it make budgeting decisions, for example, as between product development expenses (which affect cost of revenue and gross margin) and research and development, sales and marketing and general and administrative expenses (which affect operating expenses and operating margin). Finally, the availability of such information helps management track performance to both internal and externally communicated financial targets and to its competitors' operating results.

Management recognizes that the use of these non-GAAP measures has certain limitations, including the fact that management must exercise judgment in determining whether certain types of charges, such as those relating to workforce reductions executed in the ordinary course, should be excluded from non-GAAP results. However, management believes that, although it is important for investors to understand GAAP measures, providing investors with these non- GAAP measures gives them additional important information to enable them to assess, in a way management assesses, Synopsys' current and future continuing operations.

Reconciliation of Fourth Quarter and Full-Fiscal Year End Results

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income and earnings per share for the fourth quarter and fiscal year 2006.

GAAP to Non-GAAP Reconciliation of Fourth Quarter and Fiscal Year Results
                 (in thousands, except per share amounts)

  Income Statement Reconciliation
  (in thousands)                   Three Months Ended    Twelve Months Ended
                                        October 31,          October 31,
                                    2006          2005      2006      2005

  GAAP net income (loss) (2)       $9,631      $(13,475)  $24,253  $(15,478)
  Adjustments:
    Amortization of intangible
     assets                        13,463        16,639    56,443   113,398
    Stock-based compensation (1)   15,106         4,386    63,038     6,176
    In-process research and
     development                       --            --       800     5,700
    Litigation settlement              --            --        --   (33,000)
    Tax effect                     (8,068)        7,752   (33,290)  (18,738)
  Non-GAAP net income (2)         $30,132       $15,302  $111,244   $58,058

  (1) Stock-based compensation results from the Company's adoption of
      FAS 123( R ) during fiscal 2006.

  (2) Expenses related to the change in the fair value of the non-qualified
      deferred compensation plan obligation had no effect on net income.

  Earnings Per Share Reconciliation
                                    Three Months Ended   Twelve Months Ended
                                        October 31,          October 31,
                                     2006          2005      2006      2005

  GAAP earnings (loss) per
   share (2)                        $0.07        $(0.09)    $0.17    $(0.11)
  Adjustments:
    Amortization of intangible
     assets                          0.09          0.11      0.39      0.78
    Stock-based compensation (1)     0.11          0.03      0.43      0.05
    In-process research and
     development                       --            --      0.01      0.04
    Litigation settlement              --            --        --     (0.23)
    Tax effect                      (0.06)         0.05     (0.23)    (0.13)
  Non-GAAP earnings per share (2)   $0.21         $0.10     $0.77     $0.40

  Shares used in calculation      141,954       146,681   144,728   146,258

  (1) Stock-based compensation results from the Company's adoption of
      FAS 123( R ) during fiscal 2006.

  (2) Expenses related to the change in the fair value of the non-qualified
      deferred compensation plan obligation had no effect on earnings per
      share.


  Reconciliation of Target Operating Results

The following tables reconcile the specific items excluded from GAAP in the calculation of target non-GAAP operating results for the periods indicated below:

GAAP to Non-GAAP Reconciliation of First Quarter Fiscal Year 2007 Targets
                  (in thousands, except per share data)

                                                  Range for Three Months
                                                  Ending January 31, 2007
                                                  Low               High

  Target GAAP expenses (2) (3)                  $267,000          $283,000
  Adjustment:
    Estimated impact of amortization of
     intangible assets                           (12,000)          (14,000)
    Estimated impact of stock compensation
     expense (1)                                 (14,000)          (18,000)
  Target non-GAAP expenses (2) (3)              $241,000          $251,000

  (1) Stock-based compensation results from the Company's adoption of
      FAS 123( R ) during the first quarter of fiscal 2006.

  (2) Expenses related to the change in the fair value of the non-qualified
      deferred compensation plan obligation are dependent upon future market
      fluctuations and, as such, cannot be estimated in advance.

  (3) Targets do not include any potential impact of SAB 108 adoption.


                                                   Range for Three Months
                                                   Ending January 31, 2007

                                                    Low              High

  Target GAAP earnings (loss) per share (2) (3)    $0.10             $0.15
  Adjustment:
    Estimated impact of amortization of
     intangible assets                              0.10              0.08
    Estimated impact of stock-based
     compensation (1)                               0.12              0.10
    Net non-GAAP tax effect                        (0.06)            (0.05)
  Target non-GAAP earnings per share (2) (3)       $0.26             $0.28

  Shares used in non-GAAP calculation
   (midpoint of target range)                    144,000           144,000

  (1) Stock-based compensation results from the Company's adoption of
      FAS 123( R ) during the first quarter of fiscal 2006.

  (2) Expenses related to the change in the fair value of the non-qualified
      deferred compensation plan obligation will have no effect on earnings
      per share.

  (3) Targets do not include any potential impact of SAB 108 adoption.


       GAAP to Non-GAAP Reconciliation of Fiscal Year 2007 Targets

                                                   Range for Fiscal Year
                                                   Ending October 31, 2007

                                                    Low               High

  Target GAAP earnings per share (2) (3)           $0.60             $0.73
  Adjustment:
    Estimated impact of amortization of
     intangible assets                              0.33              0.32
    Estimated impact of stock-based
     compensation (1)                               0.46              0.43
    Net non-GAAP tax effect                        (0.19)            (0.20)
  Target non-GAAP earnings per share (2) (3)       $1.20             $1.28

  Shares used in non-GAAP calculation
   (midpoint of target range)                    145,000           145,000

  (1) Stock-based compensation results from the Company's adoption of
      FAS 123( R ) during the first quarter of fiscal 2006.

  (2) Expenses related to the change in the fair value of the non-qualified
      deferred compensation plan obligation have no effect on earnings per
      share.

  (3) Targets do not include any potential impact of SAB 108 adoption.


  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 https://www.synopsys.com/company/investor-relations.html  . A recording of the call will be available by calling 1-800-475-6701 (320-365-3844 for international callers), access code 847573, beginning at 5:30 p.m. Pacific Time today. A webcast replay will also be available at https://www.synopsys.com/company/investor-relations.html from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the first quarter of fiscal 2007 in February 2007. 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 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 first quarter earnings call in February 2007, 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 first quarter of fiscal 2007 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release until it releases such results in February 2007.

Availability of Final Financial Statements

Synopsys will include final financial statements for the fourth quarter and full year fiscal 2006 in its Annual Report on Form 10-K to be filed in January 2007.

About Synopsys

Synopsys, Inc. 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 http://www.synopsys.com/ .

Forward-Looking Statements

The statements made in this press release regarding projected financial results in the sections entitled "Financial Targets," and "Reconciliation of 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
     customers;
  -- failure of customers to pay license fees as scheduled;
  -- unexpected changes in the mix of time-based licenses and upfront
     licenses; lower-than-expected bookings of licenses on which revenue is
     recognized upfront;
  -- failure of our cost control efforts, including our recent efforts to
     outsource certain internal functions, to result in the anticipated
     savings;
  -- 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 employee stock-based compensation
     recognized on the Company's financial statements.

In addition, Synopsys' actual expenses and earnings per share on a GAAP basis for the fiscal quarter ending January 31, 2007 and actual earnings per share and operating cash flow on a GAAP basis for fiscal year 2007 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 goodwill or 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)changes in the anticipated amount of employee stock-based compensation recognized on the Company's financial statements, (v) actual change in the fair value of the Company's non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, and (vii) and charges driven by adoption of Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," which we are required to adopt during fiscal year 2007. Furthermore, Synopsys' actual tax rates applied to non-GAAP net income for the first quarter and full-year fiscal 2007 could differ from the targets given in this press release as a result of a number of factors, including the actual geographic mix of revenue during the quarter. Finally, Synopsys' targets for outstanding shares in the first quarter and full-year fiscal 2007 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances, acquisitions and the extent of the Company's stock repurchase activity.

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.

   INVESTOR CONTACT:
   Lisa L. Ewbank
   Synopsys, Inc.
   650-584-1901

   EDITORIAL CONTACT:
   Yvette Huygen
   Synopsys, Inc.
   650-584-4547
   yvetteh@synopsys.com


                              SYNOPSYS, INC.
    Unaudited Condensed Consolidated Statements of Operations (1) (3)
                  (in thousands, except per share data)

                                       Three Months Ended October 31, 2006
                                                   Adjustments
                                           GAAP        (2)       Non-GAAP
  Revenue:
    Time-based license                    $229,553        $--    $229,553
    Upfront license                         14,306         --      14,306
    Maintenance and service                 39,525         --      39,525
        Total revenue                      283,384         --     283,384
  Cost of revenue:
    License                                 33,748     (1,704)     32,044
    Maintenance and service                 16,292       (806)     15,486
    Amortization of intangible assets        6,772     (6,772)         --
       Total cost of revenue                56,812     (9,282)     47,530
  Gross margin                             226,572      9,282     235,854
  Operating expenses:
    Research and development                95,518     (7,845)     87,673
    Sales and marketing                     84,901     (4,020)     80,881
    General and administrative              28,840     (2,533)     26,307
    In-process research and development         --         --          --
    Amortization of intangible assets        6,691     (6,691)         --
       Total operating expenses            215,950    (21,089)    194,861
  Operating income (loss)                   10,622     30,371      40,993
  Other income, net                          4,542     (1,802)      2,740
  Income (loss) before income taxes         15,164     28,569      43,733
  Income tax provision (benefit)             5,533      8,068      13,601
  Net income (loss)                         $9,631    $20,501     $30,132

  Net income (loss) per share:
    Basic                                    $0.07                  $0.21
    Diluted                                  $0.07                  $0.21

  Shares used in computing per share
   amounts:
    Basic                                  140,415                140,415
    Diluted                                141,954                141,954


                                       Three Months Ended October 31, 2005
                                                   Adjustments
                                           GAAP        (2)       Non-GAAP
  Revenue:
    Time-based license                    $192,916         --    $192,916
    Upfront license                         16,314         --      16,314
    Maintenance and service                 45,608         --      45,608
        Total revenue                      254,838         --     254,838
  Cost of revenue:
    License                                 28,716       (471)     28,245
    Maintenance and service                 17,445       (262)     17,183
    Amortization of intangible assets        9,251     (9,251)         --
       Total cost of revenue                55,412     (9,984)     45,428
  Gross margin                             199,426      9,984     209,410
  Operating expenses:
    Research and development                83,282     (2,657)     80,625
    Sales and marketing                     84,180     (1,682)     82,498
    General and administrative              28,618     (1,364)     27,254
    In-process research and development         --         --          --
    Amortization of intangible assets        7,388     (7,388)         --
       Total operating expenses            203,468    (13,091)    190,377
  Operating income (loss)                   (4,042)    23,075      19,033
  Other income, net                          4,829     (2,050)      2,779
  Income (loss) before income taxes            787     21,025      21,812
  Income tax provision (benefit)            14,262     (7,752)      6,510
  Net income (loss)                       $(13,475)   $28,777     $15,302

  Net income (loss) per share:
    Basic                                   $(0.09)                 $0.11
    Diluted                                 $(0.09)                 $0.10

  Shares used in computing per share
   amounts:
    Basic                                  145,190                145,190
    Diluted                                145,190                146,681

  (1) Synopsys' fiscal year and fourth quarter end on the Saturday nearest
      to October 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 ), changes in fair value of non-qualified deferred
      compensation plan obligation 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 three months
      ended October 31, 2006 included total stock-based compensation of
      $15.1 million as follows: cost of revenue $2.3 million; research &
      development $6.7 million; sales & marketing $3.8 million; general &
      administrative $2.3 million.  For the three month period ended
      October 31, 2005, approximately $4.4 million of stock-based
      compensation was recorded in accordance with APB 25.  During the
      quarter ended October 31, 2006, the change in the fair value of the
      non-qualified plan obligation was a increase of $1.8 million.  This
      resulted in increased compensation expense of $1.8 million
      ($0.2 million cost of revenue, $1.2 million research & development,
      $0.2 million sales & marketing, $0.2 million general &
      administrative), and a corresponding increase to other income, net.
      During the quarter ended October 31, 2005, the change in the fair
      value of the non-qualified plan obligation was an increase of
      $2.0 million. This resulted in increased compensation expense of
      $2.0 million ($0.1 million cost of revenue, $1.0 million research and
      development, $0.6 million sales and marketing, $0.3 million general
      and administrative) and a corresponding increase to other income, net.
      There was no net effect on income before taxes or net income for each
      of the respective quarters.

  (3) In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
      "Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements," ("SAB 108"). SAB
      108 addresses the process and diversity in practice of quantifying
      misstatements and provides interpretive guidance on the consideration
      of the effects of prior year errors. We will be required to adopt the
      provisions of  SAB 108 in fiscal 2007. We are currently evaluating the
      requirements of SAB 108 and have not yet determined the impact of
      adoption on our financial statements.


                              SYNOPSYS, INC.
    Unaudited Condensed Consolidated Statements of Operations (1) (3)
                 (in thousands, except per share amounts)

                                        Twelve Months Ended October 31, 2006
                                                    Adjustments
                                           GAAP         (2)       Non-GAAP
  Revenue:
    Time-based license                     $874,862         --     $874,862
    Upfront license                          63,050         --       63,050
    Maintenance and Service                 157,648         --      157,648
        Total revenue                     1,095,560         --    1,095,560
  Cost of revenue:
    License                                 129,052     (6,404)     122,648
    Maintenance and service                  65,970     (3,168)      62,802
    Amortization of intangible assets        28,505    (28,505)          --
       Total cost of revenue                223,527    (38,077)     185,450
  Gross margin                              872,033     38,077      910,110
  Operating expenses:
    Research and development                370,629    (31,031)     339,598
    Sales and marketing                     330,361    (17,545)     312,816
    General and administrative              113,685    (10,346)     103,339
    In-process research and development         800       (800)          --
    Amortization of intangible assets        27,938    (27,938)          --
       Total operating expenses             843,413    (87,660)     755,753
  Operating income (loss)                    28,620    125,737      154,357
  Other income, net                          14,287     (5,456)       8,831
  Income (loss) before income taxes          42,907    120,281      163,188
  Income tax provision (benefit)             18,654     33,290       51,944
  Net income (loss)                         $24,253    $86,992     $111,244

  Net income (loss) per share:
    Basic                                     $0.17                   $0.78
    Diluted                                   $0.17                   $0.77

  Shares used in computing per share
   amounts:
    Basic                                   142,830                 142,830
    Diluted                                 144,728                 144,728


                                       Twelve Months Ended October 31, 2005
                                                   Adjustments
                                           GAAP        (2)       Non-GAAP
  Revenue:
    Time-based license                    $743,723         --    $743,723
    Upfront license                         60,466         --      60,466
    Maintenance and Service                187,742         --     187,742
        Total revenue                      991,931         --     991,931
  Cost of revenue:
    License                                102,327       (784)    101,543
    Maintenance and service                 70,780       (342)     70,438
    Amortization of intangible assets       81,529    (81,529)         --
       Total cost of revenue               254,636    (82,655)    171,981
  Gross margin                             737,295     82,655     819,950
  Operating expenses:
    Research and development               320,940     (5,501)    315,439
    Sales and marketing                    333,642     (3,254)    330,388
    General and administrative             104,989     (2,106)    102,883
    In-process research and development      5,700     (5,700)         --
    Amortization of intangible assets       31,869    (31,869)         --
       Total operating expenses            797,140    (48,430)    748,710
  Operating income (loss)                  (59,845)   131,085      71,240
  Other income, net                         52,056    (38,811)     13,245
  Income (loss) before income taxes         (7,789)    92,274      84,485
  Income tax provision (benefit)             7,689     18,738      26,427
  Net income (loss)                       $(15,478)    73,536     $58,058

  Net income (loss) per share:
    Basic                                   $(0.11)                 $0.40
    Diluted                                 $(0.11)                 $0.40

  Shares used in computing per share
   amounts:
    Basic                                  144,970                144,970
    Diluted                                144,970                146,258

  (1) Synopsys' fiscal year and fourth quarter end on the Saturday nearest
      to October 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 ), changes in fair value of non-qualified deferred
      compensation plan obligation 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 fiscal year
      ended October 31, 2006 included total stock-based compensation of
      $63.0 million as follows: cost of revenue $9.2 million; research &
      development $28.0 million; sales & marketing $16.3 million; general &
      administrative $9.5 million.  For the fiscal year ended October 31,
      2005, approximately $6.2 million of stock-based compensation was
      recorded in accordance with APB 25.  During the fiscal year ended
      October 31, 2006, the change in the fair value of the non-qualified
      plan obligation was a increase of $5.4 million.  This resulted in
      increased compensation expense of $5.4 million ($0.3 million cost of
      revenue, $3.0 million research & development, $1.3 million sales &
      marketing, $0.8 million general & administrative), and a corresponding
      increase to other income, net. During the fiscal year ended
      October 31, 2005, the change in the fair value of the non-qualified
      plan obligation was an increase of $5.8 million. This resulted in
      increased compensation expense of $5.8 million ($0.2 million cost of
      revenue, $2.9 million research and development, $1.8 million sales and
      marketing, $0.9 million general and administrative) and a
      corresponding increase to other income, net.  There was no net effect
      on income before taxes or net income for each of the respective
      quarters.

  (3) In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
      "Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements," ("SAB 108").
      SAB 108 addresses the process and diversity in practice of quantifying
      misstatements and provides interpretive guidance on the consideration
      of the effects of prior year errors. We will be required to adopt the
      provisions of  SAB 108 in fiscal 2007. We are currently evaluating the
      requirements of SAB 108 and have not yet determined the impact of
      adoption on our financial statements.


                              SYNOPSYS, INC.
         Unaudited Condensed Consolidated Balance Sheets (1) (2)
                 (in thousands, except par value amounts)

                                                     October 31, October 31,
                                                         2006        2005
  ASSETS:
  Current assets:
    Cash and cash equivalents                          $330,759    $404,436
    Short-term investments                              241,963     182,070
    Total cash, cash equivalents and
     short-term investments                             572,722     586,506
    Accounts receivable, net                            122,584     100,178
    Deferred income taxes                               112,342     195,501
    Income taxes receivable                              42,538      48,370
    Prepaid expenses and other current assets            44,304      16,924
      Total current assets                              894,490     947,479
  Property and equipment, net                           140,660     170,195
  Long-term investments                                   4,877       8,092
  Goodwill                                              735,643     728,979
  Intangible assets, net                                106,144     142,519
  Long-term deferred income taxes                       214,629      82,384
  Other assets                                           69,754      61,828
      Total assets                                   $2,166,197  $2,141,476

  LIABILITIES AND STOCKHOLDERS' EQUITY:
  Current liabilities:
    Accounts payable and accrued liabilities           $234,961    $231,359
    Accrued income taxes                                191,102     169,632
    Deferred revenue                                    445,598     415,689
      Total current liabilities                         871,661     816,680
  Deferred compensation and other liabilities            69,889      63,841
  Long-term deferred revenue                             53,670      42,019
             Total liabilities                          995,220     922,540
  Stockholders' equity:
    Preferred stock,  $0.01 par value:
     2,000 shares authorized; none outstanding               --          --
    Common stock,  $0.01 par value:
     400,000 shares authorized; 140,568 and
     145,897 shares outstanding, respectively             1,406       1,459
    Capital in excess of par value                    1,316,321   1,263,327
    Retained earnings                                   178,484     171,108
    Treasury stock, at cost: 16,619
     and 11,259 shares, respectively                   (312,753)   (199,482)
    Deferred stock compensation                              --      (1,475)
    Accumulated other comprehensive loss                (12,481)    (16,001)
      Total stockholders' equity                      1,170,977   1,218,936
      Total liabilities and stockholders' equity     $2,166,197  $2,141,476

  (1) Synopsys' fiscal year and fourth quarter end on the Saturday nearest
      to October 31.  For presentation purposes, the Unaudited Condensed
      Consolidated Balance Sheets refer to a calendar month end.

  (2) In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
      "Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements," ("SAB 108").
      SAB 108 addresses the process and diversity in practice of quantifying
      misstatements and provides interpretive guidance on the consideration
      of the effects of prior year errors.  We will be required to adopt the
      provisions of  SAB 108 in fiscal 2007.  We are currently evaluating
      the requirements of SAB 108 and have not yet determined the impact of
      adoption on our financial statements.


                              SYNOPSYS, INC.
     Unaudited Condensed Consolidated Statement of Cash Flows (1) (2)
                              (in thousands)

                                             Twelve Months Ended October 31,
                                                  2006              2005
  CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                              $24,253          $(15,478)
  Adjustments to reconcile net income (loss)
   to net cash provided by operating activities:
   Amortization and depreciation                 114,490           168,881
   Stock-based compensation                       63,040             6,176
   Tax benefit associated with stock options          --             6,175
   In-process research and development               800             5,700
   Deferred income taxes                         (25,503)          (14,647)
   Write-down of long-term assets                  1,336             3,582
   (Recovery) of doubtful accounts                  (850)           (4,094)
   Net change in deferred gains and
    losses on cash flow hedges                    (2,003)          (15,982)
   (Gain) loss on sale of short investment           (17)              502
   Net changes in operating assets and liabilities,
    net of acquired assets and liabilities:
    Accounts receivable                          (19,153)           56,842
    Income taxes receivable                        3,749            (1,787)
    Prepaid expenses and other current assets     (2,483)           13,055
    Other assets                                     458           (11,616)
    Accounts payable and accrued liabilities     (11,175)           22,336
    Accrued income taxes                          18,565            (7,851)
    Deferred revenue                              39,613            45,125
    Deferred compensation and other liabilities      770            12,271
   Net cash provided by operating activities     205,890           269,190

  CASH FLOWS FROM INVESTING ACTIVITIES:
   Cash paid for acquisitions, net of
    cash received                                (41,142)         (174,498)
   Proceeds from sales and maturities of
    short-term investments                       305,450           422,523
   Sale of long-term investments                     248                --
   Purchases of short-term investments          (365,261)         (372,984)
   Purchases of long-term investments             (1,665)               --
   Purchases of property and equipment           (48,461)          (43,563)
   Capitalization of software
    development costs                             (2,946)           (2,953)
   Net cash used in investing activities        (153,777)         (171,475)

  CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from credit facility                      --            75,000
   Payments on credit facility                        --           (75,000)
   Issuances of common stock                      69,566            48,615
   Purchases of treasury stock                  (199,992)          (88,386)
   Net cash used in financing activities        (130,426)          (39,771)
   Effect of exchange rate changes on
    cash and cash equivalents                      4,636              (217)
   Net (decrease) increase in cash and
    cash equivalents                             (73,677)           57,727
   Cash and cash equivalents, beginning
    of period                                    404,436           346,709
   Cash and cash equivalents, end of
    period                                      $330,759          $404,436

  (1) Synopsys' fiscal year and fourth quarter end on the Saturday nearest
      to October 31.  For presentation purposes, the Unaudited Condensed
      Consolidated Balance Sheets refer to a calendar month end.

  (2) In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
      "Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements," ("SAB 108").
      SAB 108 addresses the process and diversity in practice of quantifying
      misstatements and provides interpretive guidance on the consideration
      of the effects of prior year errors.  We will be required to adopt the
      provisions of SAB 108 in fiscal 2007.  We are currently evaluating the
      requirements of SAB 108 and have not yet determined the impact of
      adoption on our financial statements.

SOURCE: Synopsys, Inc.

CONTACT: Investor Contact: Lisa L. Ewbank, +1-650-584-1901, or Editorial
Contact: Yvette Huygen, +1-650-584-4547, or yvetteh@synopsys.com, both of
Synopsys, Inc.

Web site: http://www.synopsys.com/