MOUNTAIN VIEW, Calif., Feb. 20 /PRNewswire-FirstCall/ -- Synopsys, Inc. (NASDAQ: SNPS), a world leader in software and IP for semiconductor design and manufacturing, today reported results for its first quarter ended January 31, 2008.

For the first quarter, Synopsys reported revenue of $315.5 million, a 5.1 percent increase compared to $300.2 million for the first quarter of fiscal 2007.

"We exit the first quarter with our year solidly on track in terms of revenue and earnings growth, operating margin expansion, an excellent balance sheet, and advanced technology," said Aart de Geus, chairman and CEO of Synopsys. "And with more than 90 percent of our revenue under time-based licenses, we adhered strongly to our predictable business model."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the first quarter of fiscal 2008 was $46.4 million, or $0.31 per share, compared to $23.4 million, or $0.16 per share, for the first quarter of fiscal 2007.

Non-GAAP Results

On a non-GAAP basis, net income for the first quarter of fiscal 2008 was $66.0 million, or $0.44 per share, compared to non-GAAP net income of $44.0 million, or $0.30 per share, for the first quarter of fiscal 2007.

Non-GAAP net income consists of GAAP net income excluding employee share-based compensation expense calculated in accordance with FAS 123® 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 provided its operating model targets for the second quarter and full fiscal year 2008. These targets constitute 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.

  Second Quarter of Fiscal Year 2008 Targets:
  * Revenue: $317 million - $325 million
  * GAAP expenses: $269 million - $283 million
  * Non-GAAP expenses: $242 million - $252 million
  * Other income and expense: $0 - $4 million
  * Tax rate applied in non-GAAP net income calculations: 26 - 27 percent
  * Fully diluted outstanding shares: 145 million - 150 million
  * GAAP earnings per share: $0.22 - $0.26
  * Non-GAAP earnings per share: $0.37 - $0.39
  * Revenue from backlog: greater than 90 percent


  Full Fiscal Year 2008 Targets:
  * Revenue: $1.300 billion - $1.315 billion
  * Tax rate applied in non-GAAP net income calculations: 26 - 27 percent
  * Fully diluted outstanding shares: 145 million - 150 million
  * GAAP earnings per share: $1.03 - $1.12
  * Non-GAAP earnings per share: $1.56 - $1.61
  * Cash flow from operations: greater than $325 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 share-based compensation expense calculated in accordance with FAS 123® and change in the fair value of the Company's non-qualified deferred 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 performance of the Company's business operations. Therefore, management excludes such costs, to the extent incurred in a particular quarter, from the following historical and targeted GAAP financial measures included in this earnings release: total cost of revenue, gross margin, total operating expenses, operating income, income before provision (benefit) for income taxes, provision (benefit) for income taxes, net income and net income per share.

For each such measure, excluding these costs provides management with more consistent, comparable information about the Company's core performance. For example, since the Company does not acquire businesses on a predictable cycle, management would have difficulty evaluating the Company's performance 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 First Quarter Results

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income and earnings per share for periods indicated below:

         GAAP to Non-GAAP Reconciliation of First Quarter Results
           (unaudited, in thousands, except per share amounts)

  Income Statement Reconciliation                  Three Months Ended
                                                       January 31,
                                                   2008              2007
  GAAP net income                                $46,445           $23,357
  Adjustments:
    Amortization of intangible assets             11,624            13,353
    Share-based compensation                      15,644            16,215
    Tax effect                                    (7,697)           (8,920)
  Non-GAAP net income                            $66,016           $44,005

                                                     Three Months Ended
                                                         January 31,
                                                    2008              2007
  GAAP earnings per share                          $0.31             $0.16
  Adjustments:
    Amortization of intangible assets               0.08              0.09
    Share-based compensation                        0.10              0.11
    Tax effect                                     (0.05)            (0.06)
  Non-GAAP earnings per share                      $0.44             $0.30

  Shares used in calculation                     150,683           148,113


  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 Second Quarter Fiscal Year 2008 Targets
                 (in thousands, except per share amounts)

                                                  Range for Three Months
                                                   Ending April 30, 2008
                                                   Low              High
  Target GAAP expenses                          $269,000          $283,000
  Adjustment:
    Estimated impact of amortization of
     intangible assets                           (11,000)          (13,000)
    Estimated impact of share-based compensation (16,000)          (18,000)
  Target non-GAAP expenses                      $242,000          $252,000


                                                    Range for Three Months
                                                    Ending April 30, 2008
                                                    Low               High
  Target GAAP earnings per share                   $0.22             $0.26
  Adjustment:
    Estimated impact of amortization of intangible
     assets                                         0.09              0.07
    Estimated impact of share-based compensation    0.12              0.11
    Net non-GAAP tax effect                        (0.06)            (0.05)
  Target non-GAAP earnings per share               $0.37             $0.39

  Shares used in non-GAAP calculation (midpoint
   of target range)                              147,500           147,500




     GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2008 Targets

                                                    Range for Fiscal Year
                                                   Ending October 31, 2008
                                                    Low               High
  Target GAAP earnings per share                   $1.03             $1.12
  Adjustment:
    Estimated impact of amortization of intangible
     assets                                         0.28              0.26
    Estimated impact of share-based compensation    0.47              0.44
    Net non-GAAP tax effect                        (0.22)            (0.21)
  Target non-GAAP earnings per share               $1.56             $1.61

  Shares used in non-GAAP calculation
   (midpoint of target range)                    147,500           147,500



  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 +1-800-475-6701 (+1-320-365-3844 for international callers), access code 909867, beginning at 5:30 p.m. Pacific Time today. A webcast replay will also be available on the website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the second quarter fiscal 2008 in May 2008. 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 second quarter earnings call in May 2008, 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 2008 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release.

Availability of Final Financial Statements

Synopsys will include final financial statements for the first quarter of fiscal 2008 in its quarterly report on Form 10-Q to be filed by March 13, 2008.

About Synopsys

Synopsys, Inc. (NASDAQ: SNPS) is a world leader in electronic design automation (EDA) software for semiconductor design. The Company delivers technology-leading system and semiconductor design and verification platforms, IC manufacturing and yield optimization solutions, semiconductor intellectual property and design services to the global electronics market. These solutions enable the development and production of complex integrated circuits and electronic systems. Through its comprehensive solutions, Synopsys addresses the key challenges designers and manufacturers face today, including power management, accelerated time to yield and system-to-silicon verification. Synopsys is headquartered in Mountain View, California, and has more than 60 offices located 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;
  * changes in the mix of time-based licenses and upfront licenses;
  * lower-than-expected bookings;
  * failure of Synopsys' cost control efforts, including 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; and
  * difficulties in the integration of the products and operations of
    acquired companies or assets into Synopsys' products and operations.

In addition, Synopsys' actual expenses and earnings per share on a GAAP and non-GAAP basis for the fiscal quarter ending April 30, 2008 and actual expenses, earnings per share and operating cash flow on a GAAP and non-GAAP basis for fiscal year 2008 could differ materially from the targets stated under "Financial Targets" above for a number of reasons, including, but not limited to, (i) a determination by Synopsys that any portion of its goodwill or intangible assets have become impaired, (ii) application of the actual consolidated GAAP and non-GAAP tax rates for such periods, or judgment by management, based upon the status of pending audits or new accounting interpretations such as FASB Interpretation No. 48, to increase or decrease an income tax asset or liability, (iii) integration and other acquisition-related expenses including amortization of additional intangible assets associated with future acquisitions, if any, (iv) changes in the anticipated amount of employee share-based compensation expense recognized on Synopsys' financial statements, (v) actual change in the fair value of Synopsys' non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, (vii) changes driven by new accounting rules, regulations, interpretations or pronouncements, and (viii) other risks as detailed in our SEC filings, including those described in the "Risk Factors" section in our Annual Report on Form 10-K for the fiscal year ended October 31, 2007. Furthermore, Synopsys' actual tax rates applied to income for the second quarter and fiscal year 2008 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 second quarter and fiscal year 2008 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances or stock option exercises, acquisitions and the extent of Synopsys' 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.

Synopsys is a registered trademark of Synopsys, Inc. Any other trademarks mentioned in this release are the 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)
                 (in thousands, except per share amounts)

                                              Three Months Ended January 31,
                                                  2008              2007
  Revenue:
    Time-based license                          $267,860          $251,606
    Upfront license                               12,521            13,503
    Maintenance and service                       35,084            35,101
        Total revenue                            315,465           300,210
  Cost of revenue:
    License                                       40,398            35,520
    Maintenance and service                       15,879            16,146
    Amortization of intangible assets              5,033             6,709
       Total cost of revenue                      61,310            58,375
  Gross margin                                   254,155           241,835
  Operating expenses:
    Research and development                      92,514            95,884
    Sales and marketing                           77,370            89,808
    General and administrative                    23,841            29,677
    Amortization of intangible assets              6,591             6,644
       Total operating expenses                  200,316           222,013
  Operating income                                53,839            19,822
  Other income, net                                6,330             7,934
  Income before income taxes                      60,169            27,756
  Provision for income taxes                      13,724             4,399
  Net income                                     $46,445           $23,357

  Net income per share:
    Basic                                          $0.32             $0.16
    Diluted                                        $0.31             $0.16

  Shares used in computing per share amounts:
    Basic                                        146,001           142,772
    Diluted                                      150,683           148,113

  (1) Synopsys' first quarter ends on February 2, 2008 and February 3,
      2007, respectively.  For presentation purposes, the Unaudited
      Condensed Consolidated Statements of Operations refer to a calendar
      month end.



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

                                         January 31, 2008   October 31, 2007
  ASSETS:
  Current assets:
    Cash and cash equivalents                $428,055           $579,327
    Short-term investments                    432,260            405,126
            Total cash, cash equivalents
             and short-term investments       860,315            984,453
    Accounts receivable, net                  142,054            123,900
    Deferred income taxes                     126,262            123,165
    Income taxes receivable                    40,684             42,525
    Prepaid expenses and other current
     assets                                    52,187             53,496
            Total current assets            1,221,502          1,327,539
  Property and equipment, net                 128,578            131,866
  Goodwill                                    768,848            767,087
  Intangible assets, net                       67,173             78,792
  Long-term deferred income taxes             181,404            216,642
  Other assets                                 97,366             95,411
             Total assets                  $2,464,871         $2,617,337

  LIABILITIES AND STOCKHOLDERS' EQUITY:
  Current liabilities:
    Accounts payable and accrued
     liabilities                             $165,054           $246,209
    Accrued income taxes                       16,569            207,572
    Deferred revenue                          528,932            577,295
             Total current liabilities        710,555          1,031,076
  Deferred compensation and other
   liabilities                                 88,324             84,648
  Accrued income taxes                        146,373                  -
  Long-term deferred revenue                   79,693             65,220
             Total liabilities              1,024,945          1,180,944
  Stockholders' equity:
    Preferred stock,  $0.01 par value:
     2,000 shares authorized; none
     outstanding                                    -                  -
    Common stock,  $0.01 par value:
     400,000 shares authorized;
     143,663 and 146,365 shares
     outstanding, respectively                  1,437              1,464
    Capital in excess of par value          1,423,949          1,401,965
    Retained earnings                         313,413            263,977
    Treasury stock, at cost: 10,867 and
     16,619 shares, respectively             (302,435)          (234,918)
    Accumulated other comprehensive
     income (loss)                              3,562              3,905
             Total stockholders' equity     1,439,926          1,436,393
             Total liabilities and
              stockholders' equity         $2,464,871         $2,617,337

  (1) Synopsys' first quarter ends on February 2, 2008.  For presentation
      purposes, the Unaudited Condensed Consolidated Balance Sheets refer to
      a calendar month end.



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

                                              Three Months Ended January 31,
                                                  2008              2007
  CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                     $46,445           $23,357
  Adjustments to reconcile net income to net
   cash (used in) provided by operating
   activities:
    Amortization and depreciation                 25,333            27,179
    Share-based compensation                      15,644            16,215
    Allowance for doubtful accounts                    -              (130)
    (Gain) loss on sale of investments               200                (3)
    Deferred income taxes                         (1,858)              804
    Net change in deferred gains and losses on
     cash flow hedges                              2,104             1,306
    Net changes in operating assets and
     liabilities, net of acquired assets and
     liabilities:
      Accounts receivable                        (17,077)          (18,354)
      Prepaid expenses and other current assets   (1,185)           (5,840)
      Other assets                                  (488)              217
      Accounts payable and accrued liabilities   (81,102)          (66,075)
      Accrued income taxes                         2,754            (6,206)
      Deferred revenue                           (42,969)           84,351
      Deferred compensation and other
       liabilities                                 1,018              (756)
    Net cash (used in) provided by operating
     activities                                  (51,181)           56,065

  CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from sales and maturities of
     short-term investments                      150,523            65,129
    Purchases of short-term investments         (173,675)         (126,161)
    Purchases of long-term investments            (1,500)                -
    Purchases of property and equipment           (9,726)          (11,510)
    Capitalization of software development costs    (704)             (783)
    Net cash used in investing activities        (35,082)          (73,325)

  CASH FLOWS FROM FINANCING ACTIVITIES:
    Issuances of common stock                     12,097            81,583
    Purchases of common stock                    (82,865)          (18,070)
    Net cash (used in) provided by financing
     activities                                  (70,768)           63,513
  Effect of exchange rate changes on cash and
   cash equivalents                                5,759               144
  Net change in cash and cash equivalents       (151,272)           46,397
  Cash and cash equivalents, beginning of period 579,327           330,759
  Cash and cash equivalents, end of period      $428,055          $377,156

  (1) Synopsys' first quarter ends on February 2, 2008 and February 3, 2007,
      respectively.  For presentation purposes, the Unaudited Condensed
      Consolidated Statements of Cash Flows refer to a calendar month end.

SOURCE: Synopsys, Inc.

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

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