Press Releases

Synopsys Posts Financial Results for Fourth Quarter and Full-Year Fiscal 2004
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, 2004.

For the fourth quarter of fiscal 2004, Synopsys reported revenue of $230.6 million, a 27% decrease compared to revenue of $316.5 million for the fourth quarter of fiscal 2003. The decrease is due primarily to a further shift in Synopsys' license mix away from software licenses on which revenue is recognized when the product is shipped ("upfront" licenses) and toward licenses on which revenue is recognized over the term of the license. During the fourth quarter of fiscal 2004, revenue from upfront licenses was $69 million less than revenue from such licenses in the fourth quarter of fiscal 2003.

For fiscal year 2004, Synopsys reported annual revenue of $1.09 billion, a 7.2% decrease compared to revenue of $1.18 billion in 2003. The decrease in annual revenue reflects primarily the shift in license mix in the fourth quarter of fiscal 2004, a lower level of orders than expected in fiscal 2004, and a decrease in maintenance revenue.

GAAP Results

On a generally accepted accounting principles (GAAP) basis, for the fourth quarter of fiscal 2004, net loss was $(28.4) million, or $(0.19) per share, compared to net income of $44.6 million, or $0.27 per share, for the fourth quarter of fiscal 2003. GAAP net income for the fiscal year ended October 31, 2004 was $74.3 million, or $0.46 per share, compared to $149.7 million, or $0.95 per share, for the fiscal year ended October 31, 2003. The decrease in net income for the fiscal year was due primarily to lower revenue and other income, an increase in cost of services revenue due to increased field support headcount and an increase in amortization of intangible assets from acquisitions.

Non-GAAP Results

On a non-GAAP basis, for the fourth quarter of fiscal 2004, net income was $1.8 million, or $0.01 per share, compared to non-GAAP net income of $71.6 million, or $0.44 per share, for the fourth quarter of fiscal 2003. Non-GAAP net income for the fiscal year ended October 31, 2004 was $166.4 million, or $1.04 per share, compared to $252.1 million, or $1.59 per share, for the fiscal year ended October 31, 2003.

A description of the items excluded from non-GAAP results and a reconciliation of GAAP and non-GAAP results are contained in the section entitled "GAAP Reconciliation" below. Per share data for the periods presented reflect Synopsys' two-for-one stock split completed on September 23, 2003.

Fourth Quarter Business Environment

"We made solid progress in the fourth quarter, executing on the planned shift in our license mix with ratable licenses accounting for, as expected, for over 90% of our license orders for the quarter," said Aart de Geus, chairman and chief executive officer. "We also saw the initial customer benefits of major technology advancements in our core Galaxy™ design and Discovery ™ verification platforms, while making strategic investments in Design for Manufacturing and reusable Intellectual Property. With a good Q4, we have positioned the company well for competitive wins in 2005."

Fiscal 2005 Financial Targets

Synopsys also announced its operating model targets for the first quarter and fiscal year 2005. These targets are forward-looking information and are based on current expectations. 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 2005 Targets

   *    Revenue:  $233 million - $243 million
   *    Non-GAAP expenses:  $223 million - $233 million
   *    GAAP expenses: $264.5 million - $277 million
   *    Other income and expense:  $(1.5) million - $1.5 million
   *    Fully diluted outstanding shares:  144 million - 152 million
   *    Tax rate applied in net income calculations:  31%
   *    Non-GAAP earnings:  $0.03 - $0.07 per share
   *    GAAP earnings: $(0.17) - $(0.12) per share
   *    Revenue from backlog:  over 90% of revenue

  Fiscal Year 2005 Targets

   *    Revenue:  $930 million - $980 million
   *    Fully diluted outstanding shares:  144 million - 152 million
   *    Tax rate applied in net income calculations:  31%
   *    Non-GAAP earnings:  $0.22 - $0.32 per share
   *    GAAP earnings: $0.00 - $0.11 per share

These targets supersede all fiscal 2005 financial targets previously given by Synopsys.

GAAP Reconciliation

Non-GAAP net income consists of GAAP net income excluding, to the extent incurred in a particular quarter or fiscal year, amortization of intangible assets and deferred stock compensation, in-process research and development charges, integration and other acquisition-related expenses and facilities and workforce realignment charges. Intangible assets consist primarily of purchased technology, contract rights intangible, customer-installed base/relationships, trademarks and tradenames, covenants not to compete, customer backlog and other intangibles. Non-GAAP net income is reduced by the amount of additional taxes that Synopsys would accrue if it used non-GAAP results instead of GAAP results to calculate Synopsys' tax liability.

Synopsys' management evaluates and makes operating decisions primarily based on the bookings and revenues of its core software and services business operations and the direct, ongoing and recurring costs of those operations such as cost of revenues and research and development, sales and marketing and general and administrative expenses. Management does not believe amortization of intangible assets and deferred stock compensation, in-process research and development charges, integration and other acquisition-related expenses and facilities and workforce realignment charges are ordinary, ongoing and recurring operating charges for Synopsys' core software and services business operations. Therefore, management calculates the non-GAAP financial measures used in this earnings release excluding these charges and uses these non-GAAP financial measures to enable it to analyze further and more consistently the period-to-period financial performance of its core business operations. 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 results for the periods indicated below:

  Income Statement Reconciliation    Three Months Ended Twelve Months Ended
  (in thousands)                         October 31,        October 31,
                                        2004     2003      2004      2003

  GAAP net income (loss)              $(28,382) $44,575   $74,337  $149,724
  Amortization of intangible assets
   and deferred stock compensation      34,536   32,836   137,463   128,174
  Merger termination fee                    --       --    10,000        --
  In-process research and development    1,638       --     1,638    19,850
  Realignment charges, net of those
   settled at a lower cost than
   estimated                                (3)  14,856       510    14,856
  Collection of acquired accounts
   receivable originally assumed
   uncollectible                            --       --        --    (3,000)
  Pre-merger liabilities resolved at
   a lower cost than estimated              --   (4,714)       --    (5,330)
  Tax effect                            (5,992) (15,956)  (57,517)  (52,135)
  Non-GAAP net income                   $1,797  $71,597  $166,431  $252,139


  Income Statement Reconciliation Per Share
  (in thousands, except per share data)
                                      Three Months Ended Twelve Months Ended
                                            October 31,       October 31,
                                          2004     2003     2004     2003

  GAAP earnings (loss) per share          $(0.19)   $0.27    $0.46    $0.95
  Amortization of intangible assets
   and deferred stock compensation          0.23     0.20     0.86     0.81
  Merger termination fee                      --       --     0.06       --
  In-process research and development       0.01       --     0.01     0.13
  Realignment charges, net of those
   settled at a lower cost than estimated     --     0.09     0.01     0.09
  Collection of acquired accounts
   receivable originally assumed
   uncollectible                              --       --       --    (0.02)
  Pre-merger liabilities resolved at a
   lower cost than estimated                  --    (0.03)      --    (0.03)
  Tax effect                               (0.04)   (0.09)   (0.36)   (0.34)
  Non-GAAP earnings per share              $0.01    $0.44    $1.04    $1.59

  Shares used in calculation             151,727  164,381  159,991  158,326


  Reconciliation of Estimated Target Operating Results

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

  Non-GAAP Target Expenses Reconciliation
                                                 Range for Three Months
  (in thousands)                                 Ending January 31, 2005
                                                   Low               High
  GAAP target expenses                          $264,500          $277,000
  Estimated impact of in-process research and
   development charge                             (6,500)           (7,500)
  Estimated impact of amortization of
   intangible assets and deferred stock
   compensation                                  (35,000)          (36,500)
  Non-GAAP target expenses                      $223,000          $233,000


  Information regarding Target Earnings Per Share
                                                  Range for Three Months
  (in thousands, except per share data)           Ending January 31, 2005
                                                    Low               High

  GAAP target loss per share                      $(0.17)           $(0.12)
  Estimated impact of in-process research and
   development charge, net of tax                   0.03              0.03
  Estimated impact of amortization of
   intangible assets and deferred stock
   compensation per share, net of tax effect        0.17              0.16
  Non-GAAP target earnings per share               $0.03             $0.07

  Shares used in calculation (midpoint
   of target range)                              148,000           148,000


  Information regarding Target Earnings Per Share
                                                   Range for Fiscal Year
  (in thousands, except per share data)           Ending October 31, 2005
                                                    Low               High

  GAAP target earnings per share                     $--             $0.11
  Estimated impact of in-process research and
   development charge, net of tax                   0.03              0.03
  Estimated impact of amortization of
   intangible assets and deferred stock
   compensation per share, net of tax effect        0.19              0.18
  Non-GAAP target earnings per share               $0.22             $0.32

  Shares used in calculation (midpoint
   of target range)                              148,000           148,000


  Additional Financial Information Available on Synopsys Website

In connection with the issuance of this earnings release, Synopsys is making available to investors supplemental financial information, which can be found on Synopsys' website at http://www.synopsys.com/corporate/invest/finsupp/q404.pdf . 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 http://www.synopsys.com/corporate/invest/invest.html . A recording of the call will be available by calling 1-888-428-4470 (612-332-0530 for international callers), access code 754504, beginning at 5:30 p.m. Pacific Time today. A webcast replay will also be available at http://www.synopsys.com/corporate/invest/invest.html from approximately 5:30 p.m. Pacific Time today through the time of the announcement of Synopsys' results for the first quarter of fiscal 2005 in February 2005. In addition, Synopsys will post copies of the prepared remarks of Aart de Geus, Chairman and Chief Executive Officer, and Steve Shevick, Chief Financial Officer, on its website at http://www.synopsys.com/corporate/invest/invest.html 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 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 2005, 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 2005 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release until it releases such results in February 2005. Furthermore, 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 required by law.

Availability of Final Financial Statements

Synopsys will include final financial statements for the full year fiscal 2004 with its Annual Report on Form 10-K to be filed in January 2005.

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 (SoCs). 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 or expected future events or financial results in the sections entitled "Fourth Quarter Business Environment," "Fiscal 2005 Financial Targets," and "GAAP Reconciliation - Reconciliation of Estimated Target Operating Results" 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 the risk of:

   *    continued weakness or continued budgetary caution in the
        semiconductor or electronic systems industries;
   *    lower-than-expected research and development spending by
        semiconductor and electronic systems companies;
   *    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;
   *    unexpected changes in the mix of time-based licenses and upfront
        licenses;
   *    lower-than-expected bookings of licenses on which revenue is
        recognized upfront;
   *    lower-than-anticipated new IC design starts;
   *    competition in the market for Synopsys' products and services;
   *    failure to continue to improve Synopsys' existing products;
   *    failure to successfully develop additional intellectual property
        blocks for Synopsys' IP business or to develop and integrate its
        design for manufacturing products;
   *    difficulties in the ongoing integration of the products and
        operations of acquired companies or assets into Synopsys' products
        and operations;
   *    adverse variations from currently projected customer payment terms;
        and
   *    continued downward pressure on maintenance orders, adversely
        affecting Synopsys' future level of service revenue.

In addition, Synopsys' actual expenses and earnings per share on a GAAP basis for the fiscal quarter ending January 31, 2005 and earnings per share on a GAAP basis for the full fiscal year 2005 could differ materially from the targets stated under "Fiscal 2005 Financial Targets" above for a number of reasons, including (i) completion of the purchase accounting for Synopsys' acquisition transactions completed in the first quarter of fiscal 2005; (ii) a determination by Synopsys that any portion of its intangible assets have become impaired, (iii) changes in deferred stock compensation expenses caused by employee terminations, and (iv) integration and other acquisition-related expenses, amortization of additional intangible assets and deferred stock compensation associated with future acquisitions, if any.

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, and which are available at www.sec.gov, specifically the section contained in Part I, Item 2 of Synopsys' Quarterly Report on Form 10-Q for the third quarter of fiscal 2004 filed with the Commission on September 14, 2004 entitled "Factors That May Affect Future Results."

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

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


                                      Three Months Ended October 31, 2004(2)
                                           GAAP     Adjustments   Non-GAAP
  Revenue:
    Upfront license                         $18,301          --     $18,301
    Time-based license                      165,302          --     165,302
    Service                                  46,952          --      46,952
        Total revenue                       230,555          --     230,555
  Cost of revenue:
    Upfront license                           1,934          --       1,934
    Time-based license                       20,016          --      20,016
    Service                                  18,716          --      18,716
    Amortization of intangible assets
      and deferred stock compensation        26,055     (26,055)         --
       Total cost of revenue                 66,721     (26,055)     40,666
  Gross margin                              163,834      26,055     189,889
  Operating expenses:
    Research and development                 76,337          --      76,337
    Sales and marketing                      86,346          --      86,346
    General and administrative               25,742           3      25,745
    In-process research and development       1,638      (1,638)         --
    Amortization of intangible assets
      and deferred stock compensation         8,481      (8,481)         --
       Total operating expenses             198,544     (10,116)    188,428
  Operating income (loss)                   (34,710)     36,171       1,461
  Other income (expense), net                 1,143          --       1,143
  Income (loss) before provision
    for income taxes                        (33,567)     36,171       2,604
  Provision for income taxes                 (5,185)      5,992         807
  Net income (loss)                        $(28,382)    $30,179      $1,797
  Basic earnings (loss) per share:
    Net income (loss) per share              $(0.19)                  $0.01
    Weighted-average common shares          151,124                 151,124
  Diluted earnings (loss) per share:
    Net income (loss) per share              $(0.19)                  $0.01
    Weighted-average common shares
      and equivalents                       151,124                 151,727


                                      Three Months Ended October 31, 2003(2)
                                           GAAP    Adjustments   Non-GAAP
  Revenue:
    Upfront license                        $87,051          --     $87,051
    Time-based license                     167,859          --     167,859
    Service                                 61,543          --      61,543
        Total revenue                      316,453          --     316,453
  Cost of revenue:
    Upfront license                          4,816          --       4,816
    Time-based license                      13,465          --      13,465
    Service                                 21,252      (2,620)     18,632
    Amortization of intangible assets
      and deferred stock compensation       23,897     (23,897)         --
       Total cost of revenue                63,430     (26,517)     36,913
  Gross margin                             253,023      26,517     279,540
  Operating expenses:
    Research and development                79,283      (6,172)     73,111
    Sales and marketing                     80,295      (4,637)     75,658
    General and administrative              23,467       3,287      26,754
    In-process research and development         --          --          --
    Amortization of intangible assets
      and deferred stock compensation        8,939      (8,939)         --
       Total operating expenses            191,984     (16,461)    175,523
  Operating income (loss)                   61,039      42,978     104,017
  Other income (expense), net                2,052          --       2,052
  Income (loss) before provision
    for income taxes                        63,091      42,978     106,069
  Provision for income taxes                18,516      15,956      34,472
  Net income (loss)                        $44,575     $27,022     $71,597
  Basic earnings (loss) per share:
    Net income (loss) per share              $0.29                   $0.46
    Weighted-average common shares         155,018                 155,018
  Diluted earnings (loss) per share:
    Net income (loss) per share              $0.27                   $0.44
    Weighted-average common shares
      and equivalents                      164,381                 164,381

   (1)  Synopsys' fiscal year and fourth quarter end on the Saturday nearest
        to October 31.  For presentation purposes, the unaudited condensed
        consolidated financial statements refer to a calendar month end.
   (2)  All common share and per share data for all periods presented are
        adjusted to reflect the Company's stock split completed on September
        23, 2003.


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


                                     Twelve Months Ended October 31, 2004(2)
                                           GAAP    Adjustments  Non-GAAP
  Revenue:
    Upfront license                       $215,955         --    $215,955
    Time-based license                     663,244         --     663,244
    Service                                212,905         --     212,905
        Total revenue                    1,092,104         --   1,092,104
  Cost of revenue:
    Upfront license                         19,407        197      19,604
    Time-based license                      51,321         --      51,321
    Service                                 83,759        111      83,870
    Amortization of intangible assets
      and deferred stock compensation      102,572   (102,572)         --
       Total cost of revenue               257,059   (102,264)    154,795
  Gross margin                             835,045    102,264     937,309
  Operating expenses:
    Research and development               285,281        754     286,035
    Sales and marketing                    302,372        580     302,952
    General and administrative             121,547    (12,152)    109,395
    In-process research and development      1,638     (1,638)         --
    Amortization of intangible assets
      and deferred stock compensation       34,891    (34,891)         --
       Total operating expenses            745,729    (47,347)    698,382
  Operating income                          89,316    149,611     238,927
  Other (expense) income, net                2,276         --       2,276
  Income before provision for
    income taxes                            91,592    149,611     241,203
  Provision for income taxes                17,255     57,517      74,772
  Net income                               $74,337    $92,094    $166,431
  Basic earnings per share:
    Net income per share                     $0.48                  $1.08
    Weighted-average common shares         154,439                154,439
  Diluted earnings per share:
    Net income per share                     $0.46                  $1.04
    Weighted-average common shares
     and equivalents                       159,991                159,991


                                     Twelve Months Ended October 31, 2003(2)
                                           GAAP    Adjustments  Non-GAAP
  Revenue:
    Upfront license                       $298,280         --    $298,280
    Time-based license                     618,024         --     618,024
    Service                                260,679         --     260,679
        Total revenue                    1,176,983         --   1,176,983
  Cost of revenue:
    Upfront license                         15,950         --      15,950
    Time-based license                      53,515         --      53,515
    Service                                 77,996     (2,620)     75,376
    Amortization of intangible assets
      and deferred stock compensation       92,856    (92,856)         --
       Total cost of revenue               240,317    (95,476)    144,841
  Gross margin                             936,666     95,476   1,032,142
  Operating expenses:
    Research and development               285,880     (6,172)    279,708
    Sales and marketing                    310,692     (4,637)    306,055
    General and administrative              90,021      6,287      96,308
    In-process research and development     19,850    (19,850)         --
    Amortization of intangible assets
      and deferred stock compensation       35,318    (35,318)         --
       Total operating expenses            741,761    (59,690)    682,071
  Operating income                         194,905    155,166     350,071
  Other (expense) income, net               24,084       (616)     23,468
  Income before provision for
    income taxes                           218,989    154,550     373,539
  Provision for income taxes                69,265     52,135     121,400
  Net income                              $149,724   $102,415    $252,139
  Basic earnings per share:
    Net income per share                     $0.99                  $1.67
    Weighted-average common shares         151,251                151,251
  Diluted earnings per share:
    Net income per share                     $0.95                  $1.59
    Weighted-average common shares
     and equivalents                       158,326                158,326

   (1)  Synopsys' fiscal year and fourth quarter end on the Saturday nearest
        to October 31.  For presentation purposes, the unaudited condensed
        consolidated financial statements refer to a calendar month end.
   (2)  All common share and per share data for all periods presented are
        adjusted to reflect the Company's stock split completed on September
        23, 2003.


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


                                              October 31,        October 31,
                                                 2004               2003
  ASSETS:
  Current assets:
    Cash and cash equivalents                   $330,798          $524,308
    Short-term investments                       248,231           174,049
      Total cash, cash equivalents and
       short-term investments                    579,029           698,357
    Accounts receivable, net of allowances of
     $7,113 and $8,295, respectively             132,258           200,998
    Deferred income taxes                        125,601           248,425
    Income taxes receivable                       46,583            72,124
    Prepaid expenses and other current assets     29,562            19,302
            Total current assets                 913,033         1,239,206
  Property and equipment, net                    178,155           184,313
  Long-term investments                           12,831             8,595
  Goodwill                                       593,706           550,732
  Intangible assets, net                         198,069           285,583
  Other assets                                   196,393            38,924
             Total assets                     $2,092,187        $2,307,353

  LIABILITIES AND STOCKHOLDERS' EQUITY:
  Current liabilities:
    Accounts payable and accrued liabilities    $184,146          $204,226
    Accrued income taxes                         188,096           201,855
    Deferred revenue                             368,913           398,878
             Total current liabilities           741,155           804,959
  Deferred compensation and other liabilities     51,794            47,390
  Long-term deferred revenue                      34,189            21,594
  Stockholders' equity (2):
    Common stock,  $0.01 par value; 400,000
     shares authorized; 147,370 and 155,837
     shares outstanding, respectively              1,474             1,560
    Additional paid-in capital                 1,240,568         1,198,421
    Retained earnings                            202,146           251,979
    Treasury stock, at cost; 9,759 and 662
     shares, respectively                       (175,762)          (20,733)
    Deferred stock compensation                   (2,732)           (7,170)
    Accumulated other comprehensive income          (645)            9,353
           Total stockholders' equity          1,265,049         1,433,410
           Total liabilities and
            stockholders' equity              $2,092,187        $2,307,353

   (1)  Synopsys' fiscal year and fourth quarter end on the Saturday nearest
        to October 31.  For presentation purposes, the unaudited condensed
        consolidated financial statements refer to a calendar month end.
   (2)  All common share data for all periods presented are adjusted to
        reflect the Company's stock split completed on September 23, 2003.


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


                                   Three Months Ended  Twelve Months Ended
                                      October 31,          October 31,
                                     2004      2003       2004       2003
  CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                $(28,382)  $44,575     $74,337  $149,724
  Adjustments to reconcile net
   income (loss) to net cash
   provided by operating activities:
   Amortization and depreciation     48,244    46,337     192,774   184,110
   Deferred taxes                   (50,855)  (30,503)    (50,855)  (30,503)
   In-process research and
    development                       1,638        --       1,638    19,850
   Write-down of long-term assets     1,757       583       3,658     4,525
   Tax benefit associated with
    stock options                    30,532    61,802      30,532    65,028
   Deferred rent                         --       165          --     1,725
   Provision for doubtful accounts
    and sales returns                  (927)       --        (927)   (1,577)
   Net change in unrecognized gains
    and losses on foreign exchange
    contracts                        (2,877)    2,467     (14,019)   18,107
   Loss (gain) on sale of short-
    and long-term investments            34    (1,798)       (833)  (22,366)
   Net changes in operating assets
    and liabilities:
    Accounts receivable              12,377       804      70,511     7,183
    Income taxes receivable           2,746    (2,038)     25,541        --
    Prepaid expenses and other
     current assets                     519    73,680     (10,260)   66,289
    Other assets                      2,131   (27,590)    (11,318)   (9,055)
    Accounts payable and accrued
     liabilities                     22,136    23,048     (26,906)  (31,840)
    Accrued income taxes              5,457   (46,666)    (13,829)  (44,510)
    Deferred revenue                (11,624)  (28,274)    (17,721)    5,226
    Deferred compensation               661     1,626      11,714     9,618
   Net cash provided by operating
    activities                       33,567   118,218     264,037   391,534
  CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sales and
    maturities of short-term
    investments                     196,657    73,999     992,300   253,828
   Purchases of short-term
    investments                    (244,779) (106,287) (1,066,434) (325,386)
   Proceeds from sale of long-term
    investments                          --     2,945         412    34,951
   Purchases of long-term
    investments                        (195)     (413)     (6,339)   (1,213)
   Purchases of property and
    equipment, net                   (9,932)  (16,605)    (45,005)  (50,148)
   Cash paid for acquisitions, net
    of cash received                (20,408)       --     (60,138) (167,744)
   Capitalization of software
    development costs                  (683)     (654)     (2,739)   (2,616)
   Net cash used in investing
    activities                      (79,340)  (47,015)   (187,943) (258,328)
  CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from credit facility         --        --      200,000       --
   Payments on credit facility           --        --     (200,000)      --
   Issuances of common stock         14,827    55,240     156,719   334,928
   Purchases of treasury stock     (134,969)  (34,096)   (423,305) (260,746)
   Net cash provided by (used in)
    financing activities           (120,142)   21,144    (266,586)   74,182
   Effect of exchange rate changes
    on cash                          (2,521)    5,677      (3,018)    4,340
   Net increase (decrease) in cash
    and cash equivalents           (168,436)   98,024    (193,510)  211,728
   Cash and cash equivalents,
    beginning of period             499,234   426,284     524,308   312,580
   Cash and cash equivalents, end
    of period                      $330,798  $524,308    $330,798  $524,308

   (1)  Synopsys' fiscal year and fourth quarter end on the Saturday nearest
        to October 31.  For presentation purposes, the unaudited condensed
        consolidated financial statements refer to a calendar month end.

SOURCE: Synopsys, Inc.

CONTACT: investors, Minaxi Patel, +1-650-584-1901, or editorial, Yvette
Huygen, +1-650-584-4547, both of Synopsys, Inc.

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