8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 25, 2005

ALTERA CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	0-16617	77-0016691
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

101 Innovation Drive, San Jose, California	95134
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (408) 544-7000

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On July 25, 2005, Altera Corporation issued a press release announcing its financial results for the second quarter of 2005. A copy of the press release is furnished as Exhibit 99.1 to this report.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits

99.1       Press Release dated July 25, 2005

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ALTERA CORPORATION

/s/ Nathan Sarkisian

Nathan Sarkisian

Senior Vice President and

    Chief Financial Officer

Date: July 25, 2005

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated July 25, 2005

EX-99.1

EXHIBIT 99.1

INVESTOR CONTACT

Scott Wylie

VP – Investor Relations

Altera Corporation

(408) 544-6996

swylie@altera.com

MEDIA CONTACT

Anna Del Rosario

Director – Public Relations

Altera Corporation

(408) 544-7496

anna.delrosario@altera.com

ALTERA ANNOUNCES SECOND QUARTER RESULTS

SALES UP 8% SEQUENTIALLY; NEW PRODUCTS GROW 25%

San Jose, Calif., July 25, 2005 — Altera Corporation (Nasdaq: ALTR) today announced second quarter 2005 sales of $285.5 million, up 8% from the first quarter of 2005 and up 6% from the second quarter of 2004. Sales of the company’s new products grew 25% sequentially and were up 70% from the prior year’s second quarter.

Second quarter net income was $67.6 million, $0.18 per diluted share, compared to net income of $75.3 million, $0.20 per diluted share, in the second quarter of 2004. Gross profit margin was 68.3% for the second quarter of 2005 versus 69.9% for the second quarter of 2004.

The second quarter tax provision includes a $21 million charge related to the planned repatriation of $400 million in foreign earnings pursuant to the provisions of the American Jobs Creation Act of 2004. In addition, the company recorded a tax benefit of approximately $15.2 million arising primarily from the settlement of Federal and California income tax audits during the quarter. The net impact of these two items added $5.8 million to the company’s second quarter tax provision, reducing earnings per share by $0.01.

Altera repurchased 1.9 million shares of its common stock during the quarter at a cost of $38.0 million. Altera ended the quarter with $1.3 billion in cash and short- and long-term investments.

“Our new product growth rate accelerated from the first quarter’s pace. Stratix^® II FPGA sales doubled from the first quarter, and we continue to lead the 90-nm high-density FPGA market by a wide margin. While still very early in their life cycle, Cyclone^™ II FPGA and MAX^® II CPLD sales more than tripled, demonstrating the revenue growth potential represented by these new families. This was also another great quarter for HardCopy^® structured ASIC sales, with results up sharply from the first quarter,” said John Daane, president, chief executive officer, and chairman of the board. “Our two largest selling product families, Cyclone and Stratix FPGAs, also posted solid gains in the quarter. They remain the leading products of their generation in the PLD industry.”

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Altera’s innovation and execution made the company the fastest-growing programmable logic supplier in 2004. This track record of innovation and execution continues in 2005:

• As yet another indicator of the increasing use of programmable solutions in the consumer market, Texas Instruments (TI) is now using multiple Altera devices in its Digital Light Processing (DLP) technology. TI provides its DLP components to television manufacturers, enabling them to bring the highest quality visual experience to consumers. TI initially chose Cyclone FPGAs for its 720p DLP product. Cyclone devices met TI’s performance goals with the lowest-speed-grade device, resulting in the maximum cost/performance benefit. Cyclone devices were also readily available in high-volume quantities, a critical requirement to support the steep production ramps encountered in the consumer market. Building on the contribution made by Cyclone FPGAs, TI next adopted Stratix devices and HardCopy structured ASICs for its even higher resolution 1080p DLP product. By incorporating the high-performance digital signal processing (DSP) capabilities of Altera’s devices, which bolster TI’s advanced video processing, TI was able to bring its industry-leading innovations to market, advancing its competitive position in HDTV applications.

Because Altera is the only PLD vendor to offer a structured ASIC solution, Altera is uniquely positioned to respond to customers such as TI whose high-density FPGA-based designs require lower costs for production. Being first-to-market is critically important in fast-moving consumer electronics equipment. Programmable logic’s short design cycle offers significant advantages to these customers. Altera’s innovative products, such as the low-cost Cyclone family, are accelerating Altera’s presence in consumer products and have helped fuel the 22% compound growth Altera has experienced in the consumer market from 1999 to 2004.

• With the delivery of MAX II EPM1270 devices to the world’s largest television manufacturer, TTE Corporation, Altera has now shipped more than 400 million MAX CPLDs. Altera has led the CPLD market for more than 15 years, with cumulative MAX sales of more than $4 billion, and is further strengthening its leadership position with its new MAX II family. The MAX II family is half the cost and consumes one-tenth the power of previous MAX generations, while maintaining the same non-volatile memory and ease-of-use characteristics of the original MAX series. Due to its density and cost characteristics, the MAX II family can be used to replace less flexible and more expensive ASSPs, ASICs, and discrete devices, expanding the market beyond traditional CPLD applications.

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Business Outlook for the Third Quarter

Note: The following management expectations for the third quarter are stated in approximate terms and assume no impact from the operation of the company’s deferred compensation plan.

• Altera expects that sales in the third quarter will be up 1% to 3% sequentially. Sales growth will be more moderate in comparison to the second quarter largely as a result of typical seasonal slowing in Europe.

• Gross margins will be 68% to 69%, unchanged from the company’s previous second half gross margin expectations.

• Research and development spending will decrease to approximately $52 million, reflecting lower new product introduction costs in the quarter.

• SG&A expenses will be in the range of $58 million.

• Other income will be approximately $8 million.

• The expected tax rate will be approximately 20%.

Conference Call and Quarterly Update:

A conference call will be held today at 1:45 p.m. Pacific Time to discuss the quarter’s results and the third quarter 2005 outlook. The web cast and subsequent replay will be available in the investor relations section of the company’s web site at http://www.altera.com. A telephonic replay of the call may be accessed later in the day by calling (719) 457-0820 and referencing confirmation code 258712. The telephonic replay will be available for two weeks following the live call.

Altera’s third quarter business update will be issued in a press release available after the market close on September 6.

Forward-Looking Statements

Statements in this press release that are not historical are “forward-looking statements” as the term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally written in the future tense and/or preceded by words such as “will”, “believe”, “expects”, or words that imply or predict a future state. Investors are cautioned that all forward-looking statements in this release involve risks and uncertainty that can cause actual results to differ from those currently anticipated, due to a number of factors, including without limitation, customer business environment, market acceptance of the company’s products, the rate of growth of the company’s new products including the Stratix, Stratix II, Cyclone, Cyclone II, MAX II, and HardCopy II device families, the rate at which our customers’ new platforms enter production, as well as changing economic conditions, and other risk factors discussed in documents filed by the

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company with the Securities and Exchange Commission from time to time. Copies of Altera’s SEC filings are posted on the company’s web site and are available from the company without charge. Forward-looking statements are made as of the date of this release, and, except as required by law, the company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances.

About Altera

Altera Corporation (Nasdaq:ALTR) is the world’s pioneer of system-on-a-programmable-chip (SOPC) solutions. Combining programmable logic technology with software tools, intellectual property, and technical services, Altera provides high-value programmable solutions to approximately 14,000 customers worldwide. More information is available at http://www.altera.com.

#####

Altera, The Programmable Solutions Company, the stylized Altera logo, specific device designations and all other words that are identified as trademarks and/or service marks are, unless noted otherwise, the trademarks and service marks of Altera Corporation in the U.S. and other countries. All other product or service names are the property of their respective holder.

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ALTERA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data and note)

(Unaudited)

	THREE MONTHS ENDED									SIX MONTHS ENDED
	Jul. 1 2005			Apr. 1 2005			Jul. 2 2004			Jul. 1 2005			Jul. 2 2004
Net sales	$	285,477		$	264,822		$	268,972		$	550,299		$	511,880
Cost of sales		90,592			83,890			81,026			174,482			156,867
Gross margin		194,885			180,932			187,946			375,817			355,013
Operating expenses:
Research and development		55,340			51,389			42,738			106,729			85,320
Selling, general, and administrative		55,895			54,334			52,712			110,229			102,590
Total operating expenses		111,235			105,723			95,450			216,958			187,910
Income from operations		83,650			75,209			92,496			158,859			167,103
Interest and other income, net		8,058			4,498			3,272			12,556			7,008
Income before income taxes		91,708			79,707			95,768			171,415			174,111
Provision for income taxes		(24,142	)		(15,941	)		(20,459	)		(40,083	)		(40,045	)
Net income	$	67,566		$	63,766		$	75,309		$	131,332		$	134,066
Income per share:
Basic	$	0.18		$	0.17		$	0.20		$	0.35		$	0.36
Diluted	$	0.18		$	0.17		$	0.20		$	0.35		$	0.35
Shares used in computation:
Basic		373,040			372,881			373,696			372,961			374,723
Diluted		379,585			379,443			382,819			379,514			384,314
Tax rate		26.3%			20.0%			21.4%			23.4%			23.0%
% of Net sales:
Gross margin		68.3%			68.3%			69.9%			68.3%			69.4%
Research and development		19.4%			19.4%			15.9%			19.4%			16.7%
Selling, general, and administrative		19.6%			20.5%			19.6%			20.0%			20.1%
Income from operations		29.3%			28.4%			34.4%			28.9%			32.6%
Net income		23.7%			24.1%			28.0%			23.9%			26.2%

Note: Our Nonqualified Deferred Compensation Plan (NQDC Plan) had a gain of $0.7 million and a loss of $1.2 million, respectively, for the three month periods ended July 1, 2005 and April 1, 2005. Gains or (losses) were included in interest and other income, as well as compensation expense as follows. There was no net impact on income before income taxes or net income for any period presented.

NQDC Impact (In Millions)	Q2’05		Q1’05			Q-Q Change
Increase/(Decrease) in R&D Expense	$	0.4	$	(0.4	)	$	0.8
Increase/(Decrease) in SG&A Expense		0.3		(0.8	)		1.1
Increase/(Decrease) in Interest and other income	$	0.7	$	(1.2	)	$	1.9

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ALTERA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

	Jul. 1 2005			Apr. 1 2005			Dec. 31 2004
Assets
Current assets:
Cash and short-term investments	$	1,203,033		$	1,209,470		$	1,203,248
Accounts receivable, net		146,252			113,832			67,522
Inventories		63,588			55,604			67,454
Deferred compensation plan assets		57,134			58,965			56,148
Other current assets		148,094			132,401			142,725
Total current assets		1,618,101			1,570,272			1,537,097
Long-term investments		72,301			—			—
Property and equipment, net		156,937			158,145			159,587
Deferred income taxes and other assets, net		47,321			49,391			49,982
	$	1,894,660		$	1,777,808		$	1,746,666
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and current liabilities	$	200,735		$	183,798		$	190,813
Deferred compensation plan obligations		57,134			58,965			56,148
Deferred income and allowances on sales to distributors		255,554			225,186			221,081
Total current liabilities		513,423			467,949			468,042
Stockholders’ equity		1,381,237			1,309,859			1,278,624
	$	1,894,660		$	1,777,808		$	1,746,666
Key Ratios & Information
Current Assets/Current Liabilities		3:1			3:1			3:1
Liabilities/Equity		1:3			1:3			1:3
Annualized YTD Return on Equity		20	%		20	%		24	%
Quarterly Depreciation Expense	$	6,480		$	6,982		$	6,245
Quarterly Capital Expenditures	$	5,272		$	5,540		$	8,862
Annualized Sales per Employee	$	499		$	486		$	489
Number of Employees		2,259			2,197			2,164
Inventory MSOH (a): Altera		2.1			2.0			2.8
Inventory MSOH (a): Distribution		1.3			1.3			1.4
Days Sales Outstanding		47			39			26

^(a) MSOH: Months Supply On Hand

Note: Certain reclassifications have been made to prior period balances in order to conform to the current period’s presentation.

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ALTERA CORPORATION

REVENUE SUMMARY

(Unaudited)

	Q2’05		Q1’05		Q2’04		Q-Q Growth		Y-Y Growth
Geography
North America	24	%	24	%	27	%	4	%	-9	%
Europe	25	%	27	%	24	%	0	%	10	%
Japan	25	%	25	%	26	%	9	%	6	%
Asia Pacific	26	%	24	%	23	%	20	%	19	%
International	76	%	76	%	73	%	9	%	12	%
Total	100	%	100	%	100	%	8	%	6	%
Product Category
New	40	%	34	%	25	%	25	%	70	%
Mainstream	36	%	39	%	43	%	0	%	-13	%
Mature & Other	24	%	27	%	32	%	-3	%	-18	%
Total	100	%	100	%	100	%	8	%	6	%
Market Segment
Communications	43	%	41	%	41	%	12	%	10	%
Industrial	31	%	31	%	34	%	9	%	-2	%
Computer & Storage	10	%	11	%	11	%	-1	%	1	%
Consumer	16	%	17	%	14	%	2	%	20	%
Total	100	%	100	%	100	%	8	%	6	%
FPGAs and CPLDs
FPGA	69	%	69	%	69	%	9	%	7	%
CPLD	20	%	21	%	23	%	2	%	-9	%
Other	11	%	10	%	8	%	14	%	40	%
Total	100	%	100	%	100	%	8	%	6	%

Product Category Description

Category	Products
New	Stratix, Stratix II, Stratix GX, Cyclone, Cyclone II, MAX 3000A, MAX II, and HardCopy devices
Mainstream	APEX 20K, APEX 20KC, APEX 20KE, APEX II, FLEX 10KE, ACEX 1K, Excalibur, Mercury, MAX 7000A, and MAX 7000B devices
Mature & Other	FLEX 6000, FLEX 8000, FLEX 10K, FLEX 10KA, MAX 7000, MAX 7000S, MAX 9000, Classic, configuration and other devices, software and other tools, and intellectual property cores

Note: During the quarter ended July 1, 2005, we refined our methodology for classifying revenue by market segment. All prior period data have been adjusted to conform to the current period’s methodology. Data calculated under both the new and former methodologies are available in the investor relations section of the company’s website at http://www.altera.com.

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