10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 0-16617

ALTERA CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	77-0016691
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

101 INNOVATION DRIVE

SAN JOSE, CALIFORNIA 95134

(Address of principal executive offices)(zip code)

408-544-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨    No  x

Number of shares of common stock outstanding at July 27, 2007: 344,332,413

		PAGE NUMBER
PART I	FINANCIAL INFORMATION
ITEM 1:	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of June 29, 2007 and December 29, 2006	3
	Condensed Consolidated Statements of Income for the Three and Six months Ended June 29, 2007 and June 30, 2006	4
	Condensed Consolidated Statements of Cash Flows for the Six months Ended June 29, 2007 and June 30, 2006	5
	Notes to Condensed Consolidated Financial Statements	6
ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
ITEM 3:	Quantitative and Qualitative Disclosures About Market Risk	25
ITEM 4:	Controls and Procedures	26
PART II	OTHER INFORMATION
ITEM 1:	Legal Proceedings	26
ITEM 1A:	Risk Factors	27
ITEM 2:	Unregistered Sales of Equity Securities and Use of Proceeds	27
ITEM 4:	Submission of Matters to a Vote of Security Holders	28
ITEM 5:	Other Information	28
ITEM 6:	Exhibits	29
Signatures		30

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PART I FINANCIAL INFORMATION

ITEM 1: Financial Statements

ALTERA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except par value amount)

	June 29, 2007			December 29, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	691,563		$	738,412
Short-term investments		478,250			625,335
Total cash, cash equivalents and short-term investments		1,169,813			1,363,747
Accounts receivable, net of allowances of $5,011 and $4,975 as of June 29, 2007 and December 29, 2006, respectively		188,486			93,263
Inventories		73,532			78,477
Deferred income taxes		74,744			80,236
Deferred compensation plan assets		70,951			69,378
Other current assets		68,186			65,951
Total current assets		1,645,712			1,751,052
Long-term investments		134,921			256,563
Property and equipment, net		182,319			178,363
Deferred income taxes and other assets, net		65,034			47,282
Total assets	$	2,027,986		$	2,233,260
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	35,469		$	42,696
Accrued liabilities		27,238			27,941
Accrued compensation and related		35,055			47,884
Deferred compensation plan obligations		70,951			69,378
Deferred income and allowances on sales to distributors		273,799			298,078
Income taxes payable, net		—			125,206
Total current liabilities		442,512			611,183
Income taxes payable non-current		142,430			—
Other non-current liabilities		14,433			13,916
Total liabilities		599,375			625,099
Commitments and contingencies (Note 6)
Stockholders’ equity:
Common stock:
$0.001 par value; 1,000,000 shares authorized; outstanding - 346,316 shares at June 29, 2007 and 360,201 shares at December 29, 2006		346			360
Capital in excess of par value		494,653			506,863
Retained earnings		935,049			1,102,151
Accumulated other comprehensive loss		(1,437	)		(1,213	)
Total stockholders’ equity		1,428,611			1,608,161
Total liabilities and stockholders’ equity	$	2,027,986		$	2,233,260

See accompanying notes to condensed consolidated financial statements.

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ALTERA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands, except per share amounts)

	Three Months Ended				Six Months Ended
	June 29, 2007		June 30, 2006		June 29, 2007		June 30, 2006
Net sales	$	319,682	$	334,100	$	624,598	$	626,930
Cost of sales		113,093		113,335		217,605		210,441
Gross margin		206,589		220,765		406,993		416,489
Operating expenses:
Research and development		63,071		63,904		121,526		126,761
Selling, general, and administrative		67,863		76,749		139,647		152,998
Total operating expenses		130,934		140,653		261,173		279,759
Income from operations		75,655		80,112		145,820		136,730
Interest and other income, net		17,985		10,781		35,098		23,214
Income before income taxes		93,640		90,893		180,918		159,944
Provision for income taxes		13,110		13,633		25,329		23,991
Net income	$	80,530	$	77,260	$	155,589	$	135,953
Net income per share:
Basic	$	0.23	$	0.21	$	0.44	$	0.38
Diluted	$	0.22	$	0.21	$	0.43	$	0.37
Shares used in computing per share amounts:
Basic		352,721		360,501		355,157		359,990
Diluted		359,542		367,092		361,595		367,070
Cash dividends declared per common share	$	—	$	—	$	0.04	$	—

See accompanying notes to condensed consolidated financial statements

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ALTERA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Six Months Ended
	June 29, 2007			June 30, 2006
Cash Flows from Operating Activities:
Net income	$	155,589		$	135,953
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,178			15,325
Stock-based compensation		25,746			37,602
Deferred income tax benefit		(10,052	)		(5,543	)
Tax benefit from stock-based compensation plans		17,266			16,316
Gross tax benefit from stock-based compensation		(17,270	)		(11,455	)
Changes in assets and liabilities:
Accounts receivable, net		(95,223	)		(126,248	)
Inventories		4,945			(7,108	)
Other assets		(4,309	)		(15,121	)
Accounts payable and other liabilities		(19,988	)		59,861
Deferred income and allowances on sales to distributors		(24,279	)		109,521
Income taxes payable		19,523			(13,778	)
Net cash provided by operating activities		67,126			195,325
Cash Flows from Investing Activities:
Purchases of property and equipment		(18,903	)		(16,195	)
Purchases of available-for-sale investments		(94,976	)		(513,433	)
Proceeds from the maturities and sales of available-for-sale investments		363,315			259,794
Purchases of intangible assets		(218	)		—
Net cash provided by (used for) investing activities		249,218			(269,834	)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock through various stock plans		95,579			45,945
Repurchases of common stock		(461,601	)		(53,068	)
Payment of dividends to stockholders		(14,204	)		—
Gross tax benefit from stock-based compensation		17,270			11,455
Increase (decrease) in book overdrafts		161			(2,537	)
Payments on capital lease obligations		(398	)		(1,422	)
Net cash (used for) provided by financing activities		(363,193	)		373
Net decrease in cash and cash equivalents		(46,849	)		(74,136	)
Cash and cash equivalents at beginning of period		738,412			787,707
Cash and cash equivalents at end of period	$	691,563		$	713,571
Cash Paid During the Period for:
Income taxes (refunded) paid, net	$	(58	)	$	26,911
Interest paid on capital lease obligations	$	69		$	215
Non-cash Transactions:
Assets acquired under capital leases	$	—		$	4,245

See accompanying notes to condensed consolidated financial statements.

5

ALTERA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Summary of Significant Accounting Policies

Organization and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Altera Corporation and its wholly-owned subsidiaries, collectively referred to herein as “Altera”, “company”, “we”, “us”, or “our”, have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. This financial information reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The December 29, 2006 condensed consolidated balance sheet data was derived from our audited consolidated financial statements included in our 2006 Annual Report on Form 10-K, but does not include all disclosures required by GAAP. The condensed consolidated financial statements include our accounts as well as those of our wholly-owned subsidiaries after elimination of all significant inter-company balances and transactions.

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates and material effects on our consolidated operating results and financial position may result.

These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 29, 2006 included in our Annual Report on Form 10-K, as filed on February 27, 2007 with the Securities and Exchange Commission (“SEC”). The results of operations for the three and six months ended June 29, 2007 are not necessarily indicative of the results to be expected for any future period.

Reclassifications

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

We reclassified customer receivable balances that were in a net credit position from accounts receivable to accounts payable totaling $18.5 million at December 29, 2006. We also reclassified the non-current portion of our service award expense accrual totaling $5.2 million at December 29, 2006, which was included in accrued compensation and related to other non-current liabilities. In addition, in relation to the service award expense accrual reclassification, we changed the classification of related current deferred tax assets to non-current deferred tax assets totaling $2.0 million at December 29, 2006.

See Note 9 for impact of adoption of FIN 48.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). This statement expands the standards under SFAS No. 157, “Fair Value Measurements”, to provide entities a one-time election (Fair Value Option or FVO) to measure financial instruments and certain other items at fair value. Most of the provisions of this statement apply only to entities that elect the fair value option. The provisions of SFAS 159 are applicable only to certain financial instruments and are effective for fiscal years beginning after November 15, 2007. We are currently assessing the impact of SFAS 159 on our condensed consolidated balance sheets, statements of income and statements of cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of SFAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. SFAS 157 is effective for fiscal years and interim periods beginning after November 15, 2007. We do not believe that the adoption of the provisions of SFAS 157 will materially impact our condensed consolidated balance sheets, statements of income and statements of cash flows.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of SFAS 109” (“FIN 48”). FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting

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and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file in a particular jurisdiction. FIN 48 is effective for fiscal years beginning after December 15, 2006. We adopted the provisions of FIN 48 on December 30, 2006, the first day of our 2007 fiscal year. On May 2, 2007 the FASB issued FASB staff position No. FIN 48-1 “Definition of Settlement in FASB Interpretation No. 48-1” (“FSP FIN 48-1”). FSP FIN 48-1 provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The adoption of FIN 48 did not have any impact on our condensed consolidated statement of income. The effect of adoption of FIN 48 on our condensed consolidated balance sheet as at June 29, 2007 is summarized in Note 9 – Income Taxes.

Note 2 – Balance Sheet Details

Inventories

Inventories at June 29, 2007 and December 29, 2006 were comprised of the following:

(in thousands)	June 29, 2007		December 29, 2006
Raw materials and work in process	$	47,023	$	55,856
Finished goods		26,509		22,621
Total inventories	$	73,532	$	78,477

Advances to Distributors

On sales to distributors, our payment terms frequently require the distributor to settle amounts owed to us for an amount in excess of their ultimate cost. Our sales price to the distributor may be higher than the amount that the distributor will ultimately owe us because distributors often negotiate price discounts after purchasing the product from us and such discounts are often significant. It is our practice to apply these negotiated price discounts to future purchases, requiring the distributor to settle, on a current basis, generally within 30 days, for amounts originally invoiced. This practice has an adverse impact on the working capital of our distributors. As a consequence, we have entered into business arrangements with certain distributors whereby we advance cash to the distributors to minimize the distributor’s working capital requirements. These advances are settled in cash at least on a quarterly basis and are the result of estimates based on the amount of ending inventory as reported by the distributor multiplied by a negotiated percentage. Such advances have no impact on our revenue recognition or our condensed consolidated statements of income and are a component of the “deferred income and allowances on sales to distributors” line-item on our condensed consolidated balance sheets. We continuously process discounts taken by distributors against our deferred income and allowances on sales to distributors. We true-up the advanced amounts at the end of each quarter. These advances are set forth in agreements and are unsecured, bear no interest and are due upon demand. The agreements governing these advances can be cancelled by us at any time. Such advances totaled $107.9 million at June 29, 2007 and $112.0 million at December 29, 2006.

We also enter into arrangements that are, in substance, arrangements to finance distributors’ accounts receivable and inventory. The amounts advanced are classified as other current assets in our condensed consolidated balance sheets and totaled $49.6 million at June 29, 2007 and $54.3 million at December 29, 2006. These arrangements are set forth in binding legal agreements and are unsecured, bear no interest on unsettled balances and are due upon demand.

Long-Term Investments

We classify certain investments as long-term. Investments classified as long-term investments represent funds that are deemed to be in excess of our estimated operating requirements and have remaining maturities exceeding 12 months as of the balance sheet date. All of our investments, including long-term investments, are classified as available-for-sale and are therefore carried at fair value based on quoted market prices as of the balance sheet date.

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Property and Equipment

Property and equipment, net at June 29, 2007, and December 29, 2006 were comprised of the following:

(in thousands)	June 29, 2007			December 29, 2006
Land and land rights	$	32,059		$	30,779
Buildings		127,274			128,817
Equipment and software		237,605			224,647
Office furniture and fixtures		21,804			21,438
Leasehold improvements		7,854			7,712
Property and equipment, at cost		426,596			413,393
Accumulated depreciation and amortization		(244,277	)		(235,030	)
Property and equipment, net	$	182,319		$	178,363

We have entered into arrangements which were recorded as capital lease obligations and assets in property and equipment. Assets acquired under capital leases totaled $6.1 million (net of accumulated amortization of $7.1 million) as of June 29, 2007 and totaled $8.2 million (net of accumulated amortization of $5.0 million) as of December 29, 2006.

Depreciation and amortization expense was $7.5 million for the three months ended June 29, 2007 and $15.0 million for the six months ended June 29, 2007. Depreciation and amortization expense was $7.4 million for the three months ended June 30, 2006 and $14.5 million for the six months ended June 30, 2006.

Note 3 – Stockholders’ Equity

Comprehensive Income

The components of comprehensive income were as follows:

	Three Months Ended						Six Months Ended
(in thousands)	June 29, 2007			June 30, 2006			June 29, 2007			June 30, 2006
Net income	$	80,530		$	77,260		$	155,589		$	135,953
Change in unrealized losses on investments		(844	)		(766	)		(387	)		(1,406	)
Income tax benefit on change in unrealized losses on investments		316			287			145			542
Amortization of accumulated unamortized gain/loss on retiree medical plan, net		18			—			18			—
Comprehensive income	$	80,020		$	76,781		$	155,365		$	135,089

Accumulated other comprehensive loss presented in the accompanying condensed consolidated balance sheets consists of the accumulated unrealized gain/loss on investments, net of tax, and unamortized balance of gain/loss on our retiree medical plan, net of tax.

Dividends Declared

On July 20, 2007, our board of directors declared a cash dividend of $0.04 per common share for the second quarter of fiscal year 2007, payable on September 4, 2007 to stockholders of record on August 10, 2007.

Note 4 – Income Per Share

In accordance with Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS 128”) we compute basic income per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. To determine diluted share count, we apply the treasury stock method to determine the dilutive effect of outstanding stock option shares, restricted stock units, and ESPP shares. Our application of the treasury stock method includes as assumed proceeds the average unamortized stock-based compensation expense for the period and the impact of the pro forma deferred tax benefit or cost associated with stock-based compensation expense.

In applying the treasury stock method, we excluded 21.8 million stock option shares for the three months ended June 29, 2007 and 39.6 million stock option shares for the three months ended June 30, 2006, because their effect was anti-dilutive. Anti-dilutive stock options totaled 23.1 million stock option shares for the six months ended June 29, 2007 and 39.9 million stock option shares for the six months ended June 30, 2006. While these stock option shares are currently anti-dilutive, they could be dilutive in the future. All restricted stock units outstanding as of June 29, 2007 and June 30, 2006 were

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in-the-money and included in our treasury stock method calculation. A reconciliation of basic and diluted income per share is presented below:

	Three Months Ended				Six Months Ended
(in thousands, except per share amounts)	June 29, 2007		June 30, 2006		June 29, 2007		June 30, 2006
Basic:
Net income	$	80,530	$	77,260	$	155,589	$	135,953
Basic weighted shares outstanding		352,721		360,501		355,157		359,990
Net income per share	$	0.23	$	0.21	$	0.44	$	0.38
Diluted:
Net income	$	80,530	$	77,260	$	155,589	$	135,953
Weighted shares outstanding		352,721		360,501		355,157		359,990
Effect of dilutive securities:
Stock options, ESPP, and restricted stock unit shares		6,821		6,591		6,438		7,080
Diluted weighted shares outstanding		359,542		367,092		361,595		367,070
Net income per share	$	0.22	$	0.21	$	0.43	$	0.37

Note 5 – Deferred Income Taxes and Other Assets, Net

Deferred income taxes and other assets, net at June 29, 2007 and December 29, 2006 were comprised of the following:

(in thousands)	June 29, 2007		December 29, 2006
Deferred income taxes non-current	$	58,675	$	42,984
Intangible assets, net		490		504
Deposits non-current		5,869		3,794
Deferred income taxes and other assets, net	$	65,034	$	47,282

Deferred income taxes reflect the effect of temporary differences between asset and liability amounts that are recognized for financial reporting purposes and amounts that are recognized for income tax purposes. These deferred taxes are measured by applying currently enacted tax laws. Valuation allowances, if necessary, are recognized to reduce deferred tax assets to the amount that will more likely than not be realized. In assessing the likelihood of realization, we consider estimates of future taxable income.

We amortize intangible assets on a straight-line basis over their estimated useful lives. Amortization of intangible assets was $0.1 million for the three months ended June 29, 2007 and was $0.2 million for the six months ended June 29, 2007. Amortization of intangible assets was $0.4 million for the three months ended June 30, 2006 and $0.8 million for the six months ended June 30, 2006.

Note 6 – Commitments and Contingencies

Leases

We lease facilities under non-cancelable lease agreements expiring at various times through 2015. There have been no significant changes to our operating lease obligations since our 2006 fiscal year end. The balance of our capital lease obligations included in accrued and other non-current liabilities was $3.5 million as of June 29, 2007 and $3.9 million as of December 29, 2006. Amortization expense related to assets acquired under capital leases was $1.1 million and $1.9 million, respectively, for the three and six months ended June 29, 2007.

9

Indemnification and Product Warranty

We have agreed to indemnify certain customers, distributors, suppliers, and subcontractors for attorney fees, and damages and costs awarded against these parties in certain circumstances in which our products are alleged to infringe third party intellectual property rights including patents, trade secret, trademarks, or copyrights. We cannot estimate the amount of potential future payments, if any, that we might be required to make as a result of these agreements. To date, we have not paid any claim or been required to defend any action related to our indemnification obligations, and accordingly, we have not accrued any amounts for such indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.

We generally warrant our products, for varying lengths of time, against defects in materials, workmanship and non-conformance to our specifications. We provide for known product issues if a loss is probable and can be reasonably estimated. If there is a material increase in customer claims compared with our historical experience or if costs of servicing warranty claims are greater than expected, we may record a charge against cost of sales.

The following table summarizes the activity related to our product warranty liability for the six months ended June 29, 2007 and June 30, 2006, which was included in accrued liabilities in our condensed consolidated balance sheets.

	Six Months Ended
(in thousands)	June 29, 2007			June 30, 2006
Balance at beginning of period	$	1,115		$	1,454
(Reduction) addition to estimated reserve		(874	)		1,260
Payments		(58	)		(172	)
Balance at end of period	$	183		$	2,542

Note 7 – Common Stock Repurchases

Share repurchase activities for the three and six months ended June 29, 2007 and June 30, 2006 were as follows:

	Three Months Ended				Six Months Ended
(in thousands, except per share amounts)	June 29, 2007		June 30, 2006		June 29, 2007		June 30, 2006
Shares repurchased		14,078		448		21,245		2,666
Cost of shares repurchased	$	316,225	$	9,403	$	461,601	$	53,068
Average price per share	$	22.46	$	20.99	$	21.73	$	19.91

On March 28, 2007, our board of directors approved a 50 million share increase in the number of shares of common stock authorized for repurchase under our common stock repurchase program. Since the inception of our common stock repurchase program in 1996 through June 29, 2007, we have repurchased a total of 114.9 million shares of our common stock for an aggregate cost of $2.4 billion. All shares were retired upon acquisition. As of June 29, 2007, 43.1 million shares remained authorized for repurchases under our common stock repurchase program.

Note 8 – Stock-Based Compensation

Stock-Based Compensation Plans

2005 Equity Incentive Plan

Our equity incentive program is a broad-based, long-term retention program intended to attract, motivate, and retain talented employees as well as align stockholder and employee interests. On May 10, 2005, our stockholders approved Altera’s 2005 Equity Incentive Plan (the “2005 Plan”). The 2005 Plan replaced our 1996 Stock Option Plan (the “1996 Plan”) and our 1998 Director Stock Option Plan (the “1998 Plan”) and is now Altera’s only plan for providing stock-based incentive compensation (“awards”) to both our eligible employees and non-employee directors. Awards that may be granted under the 2005 Plan include non-qualified and incentive stock options, restricted stock units (“RSUs”), restricted stock awards, stock appreciation rights, and stock bonus awards. To date, we have granted both options and RSUs under the 2005 Plan. The majority of awards of stock options and RSUs granted under the 2005 Plan vest over four years. Stock options granted under the 2005 Plan have a maximum contractual term of ten years. As of June 29, 2007, the 2005 Plan had a total of 24.9 million shares reserved for future issuance, of which 15.5 million shares were available for future grants.

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Prior Stock Option Plans

Prior to stockholder approval of the 2005 Plan, we granted stock options under the 1996 Plan and the 1998 Plan. The 1996 Plan provided for the periodic issuance of stock options to our employees, and the 1998 Plan provided for the periodic issuance of stock options to members of our board of directors who were not employees. The vesting period for the stock options granted under these plans was one to five years. The maximum contractual term of stock options granted under these plans was ten years.

As of June 29, 2007, the 1996 Plan had 41.7 million shares reserved for future issuance and the 1998 Plan had 0.3 million shares reserved for future issuance. Shares reserved for future issuance under the 1996 Plan and the 1998 Plan are for stock options previously granted that remained outstanding as of June 29, 2007. We no longer grant awards under these plans.

Prior to the 1996 and 1998 Plans, we granted stock options under various other plans. The contractual terms for the majority of awards granted under these plans were consistent with the 1996 and 1998 Plans. We no longer grant awards under these plans.

A summary of shares available for grant under our 2005 Plan is as follows:

(in thousands)	Shares Available For Grant
Balance, December 29, 2006	17,932
Stock option grants	(917	)
Stock options cancelled (including forfeited and expired shares) (1)	1,310
RSUs granted (2)	(3,292	)
RSUs forfeited (2)	430
Balance, June 29, 2007	15,463

(1) Includes 1.1 million shares that were granted under the 1996 Plan and 1998 Plan that were outstanding on the effective date of the 2005 Plan and were cancelled during the six months ended June 29, 2007. Upon cancellation, these shares were returned to the pool of shares available for grant and issuance under the 2005 Plan.

(2) During the six months ended June 29, 2007, we granted 1.5 million RSUs, of which 0.2 million were forfeited during the period. For purposes of determining the number of shares available for grant under the 2005 Plan against the maximum number of shares authorized, each RSU granted reduces the number of shares available for grant by 2.25 shares and each RSU forfeited increases shares available for grant by 2.25 shares.

A summary of stock option activity for the six months ended June 29, 2007 and information regarding stock options outstanding, exercisable, and vested and expected to vest as of June 29, 2007 is as follows:

(in thousands, except price per share amounts and terms)	Number of Shares		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (1)
Outstanding, December 29, 2006	54,633		$	20.24
Grants	917			20.60
Exercises	(6,571	)		13.57
Cancelled/Expired/Forfeited	(1,310	)		23.50
Outstanding, June 29, 2007	47,669		$	21.08	5.4	$	102,637
Exercisable, June 29, 2007	39,688		$	21.20	4.9	$	88,067
Vested and expected to vest, June 29, 2007	46,921		$	21.09	5.4	$	101,091

(1) Aggregate intrinsic value for stock options represents the difference between the exercise price and the closing price per share of our common stock on June 29, 2007, multiplied by the number of stock options outstanding, exercisable, or vested and expected to vest as of June 29, 2007.

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	Stock Options Outstanding				Stock Options Exercisable
Range of Exercise Prices	Number Outstanding at June 29, 2007 (in thousands)	Weighted - Average Remaining Contractual Term (in Years)	Weighted- Average Exercise Price Per Share		Number Exercisable at June 29, 2007 (in thousands)	Weighted- Average Exercise Price Per Share
$  0.01 - $13.91	6,734	4.19	$	12.35	6,734	$	12.35
$14.04 - $20.61	11,551	7.50		19.55	6,210		19.43
$20.62 - $22.49	10,889	5.28		21.61	9,275		21.68
$22.54 - $23.47	12,079	5.21		23.34	11,103		23.35
$23.50 - $61.56	6,416	3.59		27.84	6,366		27.87
	47,669	5.42	$	21.08	39,688	$	21.20

For the six months ended June 29, 2007, 6.6 million non-qualified stock option shares were exercised. The aggregate intrinsic value of stock options exercised during the six months ended June 29, 2007 was $56.4 million. The aggregate intrinsic value represents the difference between the exercise price and the selling price received by option holders upon the exercise of stock options during the period.

The net tax benefit realized from the exercise of non-qualified stock options, the disqualifying dispositions from the employee stock purchase plan (“ESPP”), and the vesting of RSUs was $17.3 million and $16.3 million for the six months ended June 29, 2007 and June 30, 2006, respectively.

Employee Stock Purchase Plan

As implemented, our 1987 ESPP has two consecutive, overlapping twelve-month offering periods, with a new period commencing on the first trading day on or after May 1 and November 1 of each year and terminating on the last trading day on or before April 30 and October 31. Each twelve-month offering period includes two six-month purchase periods. The purchase price at which shares are sold under the ESPP is 85% of the lower of the fair market value of a share of our common stock on (1) the first day of the offering period, or (2) the last trading day of the purchase period. If the fair market value at the end of any purchase period is less than the fair market value at the beginning of the offering period, each participant will be automatically withdrawn from the current offering period following the purchase of shares on the purchase date and will be automatically re-enrolled in the immediately following offering period.

On May 8, 2007, the stockholders approved an amendment to the ESPP to increase the number of shares reserved for issuance from 20.7 million to 21.7 million shares. As of June 29, 2007, 3.1 million shares were available for future issuance under the ESPP. Sales under the ESPP were 579,064 shares of common stock at a price of $15.07 for the six months ended June 29, 2007 and 579,605 shares of common stock at a price of $14.12 for the six months ended June 30, 2006.

Valuation and Expense Information Under SFAS 123(R)

Stock Options and ESPP Shares

On December 31, 2005, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”). We measure and recognize compensation expense for all stock-based awards made to our employees and directors, including employee stock options and other stock-based awards, based on estimated fair values at the grant date as required by SFAS 123(R). Stock-based compensation expense under SFAS 123(R) was as follows:

	Three Months Ended						Six Months Ended
(in thousands)	June 29, 2007			June 30, 2006			June 29, 2007			June 30, 2006
Cost of sales	$	321		$	554		$	654		$	1,077
Research and development		4,918			7,977			10,431			15,901
Selling, general, and administrative		7,404			10,158			14,661			20,624
Pre-tax stock-based compensation expense		12,643			18,689			25,746			37,602
Less: income tax benefit		(3,962	)		(4,996	)		(7,631	)		(9,584	)
Net stock-based compensation expense	$	8,681		$	13,693		$	18,115		$	28,018

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At June 29, 2007, unamortized stock-based compensation expense related to outstanding unvested stock options, RSUs, and ESPP shares that are expected to vest was approximately $82.5 million. This unamortized stock-based compensation expense is expected to be recognized over a weighted average period of approximately 2.7 years. In addition to the expense for outstanding unvested stock options, RSUs and ESPP shares, we will incur significant additional expense during fiscal year 2007 related to new awards granted during 2007. During the three and six months ended June 29, 2007, no stock-based compensation expense was capitalized.

We estimate the fair value of stock options and ESPP shares on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions. However, stock options granted under our stock option plans and ESPP shares are not freely tradable, or transferable, and have vesting restrictions.

The Black-Scholes model requires our estimate of highly subjective assumptions, which greatly affect the fair value of each stock option and ESPP share. The assumptions used to estimate the fair value of stock options and ESPP shares granted during the three and six months ended June 29, 2007 and June 30, 2006 were as follows:

	Three Months Ended						Six Months Ended
	June 29, 2007			June 30, 2006			June 29, 2007			June 30, 2006
Stock options:
Expected term (in years)		5.0			4.8			5.0			4.7
Expected stock price volatility		36.8	%		42.9	%		36.7	%		42.2	%
Risk-free interest rate		4.5	%		5.0	%		4.8	%		4.4	%
Dividend yield		0.7	%		—			0.1	%		—
Weighted-average estimated fair value	$	8.48		$	8.95		$	8.18		$	8.45
ESPP shares:
Expected term (in years)		0.8			0.8			0.8			0.8
Expected stock price volatility		29.3	%		30.1	%		29.3	%		30.1	%
Risk-free interest rate		4.9	%		5.0	%		4.9	%		5.0	%
Dividend yield		0.6	%		—			0.6	%		—
Weighted-average estimated fair value	$	5.91		$	5.62		$	5.91		$	5.62

For stock options, our expected term estimate represents the weighted average term for stock options that have completed the full contractual term based on the period from the date of grant to exercise, cancellation, or expiration. For ESPP shares, the expected term represents the average term from the first day of the offering period to the purchase date.

Our expected stock price volatility assumption for stock options is estimated using a combination of implied volatility for publicly traded options on our stock with a term of one year or more and our historical stock price volatility. Our expected stock price volatility assumption for ESPP shares is estimated using a combination of implied volatility for publicly traded options on our stock with a term of six months and our historical stock price volatility.

The interest rate used to value stock options and ESPP shares approximates the risk-free interest rate of a zero-coupon Treasury bond on the date of grant.

We monitor the assumptions used to compute the fair value of stock options and ESPP shares and revise our methodology as appropriate.

RSUs

For RSUs, stock-based compensation expense is calculated based on the fair market value of our stock on the date of grant, reduced by the present value of estimated expected future dividends, and then multiplied by the number of RSUs granted. The grant-date value of RSUs, less estimated pre-vest forfeitures, is expensed on a straight-line basis over the vesting period. The vesting period for RSUs is generally four years.

On April 30, 2007, we granted RSUs to executive officers that are contingent on the company achieving net income from continuing operations as a percentage of revenue of 18% or greater in 2007. If this performance goal is met in 2007, the RSUs will vest in four equal amounts on or about the anniversary of the grant date, subject to the individual’s continued employment with the company. If this performance goal is not met in 2007, no stock-based compensation expense will be recognized and any previously recognized stock-based compensation expense will be reversed. The expected cost of the grant is being reflected over the service period, and is reduced for estimated forfeitures.

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A summary of our RSU activity for the six months ended June 29, 2007 and information regarding RSUs outstanding and expected to vest as of June 29, 2007 is as follows:

(in thousands, except terms)	Number of Shares		Weighted-Average Grant-Date Fair Market Value		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (1)
Outstanding, December 29, 2006	2,751		$	18.24
Grants	1,463			20.48
Vested	(319	)		19.31
Cancelled/Forfeited	(191	)		18.53
Outstanding, June 29, 2007	3,704		$	18.93	3.1	$	81,973
Vested and expected to vest, June 29, 2007	3,071		$	19.01	3.2	$	67,970

(1) Aggregate intrinsic value for RSUs represents the closing price per share of our stock on June 29, 2007, multiplied by the number of RSUs outstanding or expected to vest as of June 29, 2007.

The weighted average assumptions used to estimate the fair value of RSUs granted during the three and six months ended June 29, 2007 were as follows:

	Three Months Ended June 29, 2007			Six Months Ended June 29, 2007
RSUs:
Risk-free interest rate		4.6	%		0.8	%
Dividend yield		0.7	%		0.1	%
Weighted-average estimated fair value	$	22.16		$	20.42

Additional Information

On October 24, 2006, the company filed its 2005 Form 10-K/A, which amended its previously filed 2005 Form 10-K, and restated its consolidated financial statements for the fiscal years 2005, 2004 and 2003 and selected consolidated financial data for the fiscal years 2001 to 2004. The restatement primarily related to adjustments recorded to correct errors in accounting for stock option grants and modifications.

In January 2007, subsequent to the filing of our Form 10-K/A, the SEC released additional guidance on the preparation of restated financial statements for errors in accounting for stock awards. In response to this guidance, we are providing the following additional disclosures of stock-based compensation expense (and related tax effect) for the fiscal years ended 1996 to 2002:

(in thousands)	2002			2001			2000			1999			1998			1997			1996			Total
Pre-tax stock-based compensation expense, as previously reported	$	11,377		$	18,569		$	9,764		$	—		$	—		$	—		$	—		$	39,710
Add: pre-tax stock-based compensation expense adjustments		5,191			8,066			3,653			2,565			1,005			16,540			2,122			39,142
Pre-tax stock-based compensation expense, as restated		16,568			26,635			13,417			2,565			1,005			16,540			2,122			78,852
Less: income tax benefit		(4,391	)		(7,797	)		(4,035	)		(708	)		(277	)		(4,565	)		(586	)		(22,359	)
Net stock-based compensation expense, as restated	$	12,177		$	18,838		$	9,382		$	1,857		$	728		$	11,975		$	1,536		$	56,493

Note 9 – Income Taxes

Our effective tax rate reflects the impact of a significant amount of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory tax rate. Our effective tax rate for the three and six months ended June 29, 2007 was 14%, compared with 15% for the three and six months ended June 30, 2006. The decrease in our effective tax rate was primarily due to the reinstatement in December 2006 of the federal R&D tax credit.

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We maintain within our income taxes payable account liabilities for uncertain tax benefits. These liabilities involve considerable judgment and estimation and are monitored by management based on the best information available including changes in tax regulations, the outcome of relevant court cases and other information. We are currently under examination by various taxing authorities. Although the outcome of any tax audit is uncertain, we believe we have adequately provided in our condensed consolidated financial statements for any additional taxes that we may be required to pay as a result of such examinations. If the payment ultimately proves to be unnecessary, the reversal of these tax liabilities would result in tax benefits being recognized in the period we determine such liabilities are no longer necessary. However, if an ultimate tax assessment exceeds our estimate of tax liabilities, an additional tax provision will be recorded. The impact of such adjustments in our tax accounts could have a material impact on our consolidated results of operations in future periods.

We adopted the provisions of Financial Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (“FIN 48”) an interpretation of FASB Statement No. 109” (“SFAS 109”) on December 30, 2006. As a result of implementing FIN 48, we decreased our income tax payable by $2.3 million with a corresponding adjustment to opening retained earnings as of December 30, 2006. We also reclassified $117 million from current to non-current income taxes payable as of December 30, 2006.

On December 30, 2006, we had $137.3 million of unrecognized tax benefits. As of June 29, 2007, we recorded additional unrecognized tax benefits of $16.1 million for a total of $153.4 million. If recognized, approximately $140.4 million, net of federal benefits, would be recorded as an income tax benefit in our condensed consolidated statement of income. None of the $153.4 million of unrecognized tax benefits is expected to be paid within the next 12 months.

We recognize interest and penalties related to uncertain tax positions in our income tax provision. On the date of adoption of FIN 48, we had $18.5 million of accrued interest and $4.2 million of accrued penalties related to uncertain tax positions. As of June 29, 2007, there have been no material changes to accrued interest and penalties related to our uncertain tax positions.

We file U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. We are currently under examination by the Internal Revenue Service for fiscal years 2002 through 2004 and are likely to be subject to examination for fiscal years 2005 and 2006. Other significant jurisdictions in which we may be subject to examination for fiscal years 2002 forward include Hong Kong, Ireland, Japan, and the State of California.

Note 10 – Nonqualified Deferred Compensation Plan

We allow our U.S.-based officers, director-level employees, and members of our board of directors to defer a portion of their compensation under the Altera Corporation Nonqualified Deferred Compensation Plan (“NQDC Plan”). Our Retirement Plans Committee administers the NQDC Plan. At June 29, 2007, there were approximately 140 participants in the NQDC Plan who self-direct their investments, subject to certain limitations. In the event we become insolvent, NQDC Plan assets are subject to the claims of our general creditors. Since the inception of the NQDC Plan, we have not made any contributions to the NQDC Plan and we have no commitments to do so in the future. There are no NQDC Plan provisions that provide for any guarantees or minimum return on investments. NQDC Plan participants are prohibited from investing in Altera common stock. On June 29, 2007, NQDC Plan assets and obligations were $71.0 million. On December 29, 2006, NQDC Plan assets and obligations were $69.4 million.

We account for investment income earned by the NQDC Plan as interest and other income, net. The investment income also represents an increase in the future payout to employees and is treated as current period compensation expense. During the three months ended June 29, 2007, the NQDC Plan experienced a net investment gain of $3.0 million. This gain resulted in a $3.0 million favorable impact to other income and an unfavorable impact to operating expenses, increasing research and development expenses by $1.6 million and increasing selling, general and administrative expenses by $1.4 million. During the six months ended June 29, 2007, the NQDC Plan experienced a net investment gain of $4.2 million. This gain resulted in a $4.2 million favorable impact to other income and an unfavorable impact to operating expenses, increasing compensation expense by $4.2 million.

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During the three months ended June 30, 2006, the NQDC Plan experienced a net investment loss of $1.0 million. This loss resulted in a $1.0 million unfavorable impact to other income and a favorable impact to operating expenses, decreasing selling, general and administrative expenses by $0.6 million and decreasing research and development expenses by $0.4 million. During the six months ended June 30, 2006, the NQDC Plan experienced a net investment gain of $1.3 million. This gain resulted in a $1.3 million favorable impact to other income and an unfavorable impact to operating expenses, increasing compensation expense by $1.3 million.

Income earned by the NQDC Plan does not, nor has it ever, impacted our income before income taxes, net income, or cash balances.

Note 11 – Legal Proceedings

We have been named as a party to several lawsuits concerning our historical stock option practices and related accounting and reporting.

In May and July 2006, we were notified that three shareholder derivative lawsuits had been filed in the Superior Court of the State of California, County of Santa Clara, by persons identifying themselves as Altera shareholders and purporting to act on behalf of Altera, naming Altera Corporation as a nominal defendant and naming some of our current and former officers and directors as defendants. On July 12, 2006, one of these derivative actions was voluntarily dismissed by the plaintiff shareholder. The remaining two derivative lawsuits pending in Santa Clara Superior Court were consolidated into a single action on September 5, 2006. Plaintiffs filed a second amended consolidated complaint on December 15, 2006. On January 30, 2007, Altera and the defendants filed a motion to stay this action pending resolution of the federal derivative action (discussed below). There were no material developments in this action during the quarter ended June 29, 2007.

The consolidated California state court action names Altera Corporation as a nominal defendant and the following current and former Altera officers and directors as defendants: John P. Daane, Nathan M. Sarkisian, Denis M. Berlan, Robert W. Reed, Robert J. Finocchio, Jr., Kevin McGarity, Paul Newhagen, William E. Terry, Susan Wang, Charles M. Clough, Rodney Smith, Michael B. Jacobs, Katherine E. Schuelke, Deborah Reiman, Michael J. Ellison, C. Wendell Bergere, Clive McCarthy, and Peter Smyth. Plaintiffs assert claims against these individual defendants for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, unjust enrichment, violations of California Corporation Code sections 25402 and 25403, breach of fiduciary duty for insider selling and misappropriation of information, rescission, constructive trust, accounting, and deceit. Plaintiffs’ claims concern the granting of stock options by Altera between 1994 and 2001 and the alleged filing of false and misleading financial statements between 1994 and 2006. All of these claims are asserted derivatively on behalf of Altera. Plaintiffs seek, among other relief, an indeterminate amount of damages from the individual defendants and a judgment directing Altera to reform its corporate governance practices.

During the months of May, June, and July 2006, four other derivative lawsuits were filed by purported Altera shareholders, on behalf of Altera, in the United States District Court for the Northern District of California. On August 8, 2006, these actions were consolidated, and the plaintiffs filed a consolidated complaint on November 30, 2006. Altera moved to dismiss this action for lack of standing on January 29, 2007. There were no material developments in this action during the quarter ended June 29, 2007.

Among the defendants named in these derivative actions are Altera Corporation as a nominal defendant and the following current and former officers and directors of Altera: John P. Daane, Nathan M. Sarkisian, Denis M. Berlan, Robert W. Reed, Robert J. Finocchio, Jr., Kevin McGarity, Paul Newhagen, William E. Terry, Susan Wang, Charles M. Clough, Rodney Smith, Michael B. Jacobs, Katherine E. Schuelke, John R. Fitzhenry, Deborah Reiman, Michael J. Ellison, C. Wendell Bergere, Clive McCarthy, and Peter Smyth. The consolidated complaint includes claims for violations of Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934, breach of fiduciary duty, corporate waste, gross mismanagement, unjust enrichment, abuse of control, insider selling and misappropriation of information, rescission, accounting, and violations of California Corporation Code sections 25402 and 25502.5. Plaintiffs’ claims concern the granting of stock options by Altera between 1995 and 2001 and the alleged filing of false and misleading financial statements between 1996 and 2005.

Note 12 – Subsequent Events

The company is currently negotiating a financing commitment letter to provide a long-term credit facility of up to $750 million. If finalized, the company’s current intention is to draw $500 million from this facility and use the proceeds to repurchase its common stock. The company would then intend to repurchase up to a total of $1.5 billion of its common stock from the beginning of 2007 through the first half of 2008.

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On July 24, 2007, the company filed with the SEC a Tender Offer Statement on Schedule TO. The company is offering certain optionees the opportunity to amend the stock option grant made on December 20, 2000 to include new restrictions on exercisability in order to limit the potential adverse personal tax consequences that may apply to a portion of the grant under Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations issued by the U.S. Internal Revenue Service thereunder.

On July 20, 2007, our board of directors declared a cash dividend of $0.04 per common share for the second quarter of fiscal year 2007, payable on September 4, 2007 to stockholders of record on August 10, 2007.

On July 2, 2007, we implemented a new enterprise resource planning (“ERP”) system.

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as information contained in the risk factors described in Item 1A of this report and elsewhere in this report, contains forward-looking statements, which are provided under the “safe harbor” protection of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “will,” “may,” “should,” “could,” “expect,” “suggest,” “believe,” “anticipate,” “intend,” “plan,” or other similar words. Forward-looking statements include statements regarding (1) our gross margins and factors that affect gross margins; (2) trends in our future sales; (3) our research and development expenditures and efforts; (4) our capital expenditures; (5) the impact of accounting pronouncements, (6) our provision for tax liabilities and other critical accounting estimates.

Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The forward-looking statements contained in this report are based on information that is currently available to us and expectations and assumptions that we deemed reasonable at the time the statements were made. We do not undertake any obligation to update any forward-looking statements in this report or in any of our other communications, except as required by law. All such forward-looking statements should be read as of the time the statements were made and with the recognition that these forward-looking statements may not be complete or accurate at a later date.

Many factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements contained in this report. These factors include, but are not limited to, those risks described in Part II Item 1A of this report and those risks described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 29, 2006.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires our management to make judgments and estimates that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Our management believes that we consistently apply these judgments and estimates and the condensed consolidated financial statements and accompanying notes fairly represent all periods presented. However, any differences between these judgments and estimates and actual results could have a material impact on our condensed consolidated statement of income and financial conditions. Critical accounting estimates, as defined by the Securities and Exchange Commission, are those that are most important to the portrayal of our consolidated financial condition and results of operations and require our management’s most difficult and subjective judgments and estimates of matters that are inherently uncertain. Our critical accounting estimates include those regarding (1) revenue recognition, (2) valuation of inventories, (3) income taxes, and (4) stock-based compensation. For a discussion of our critical accounting estimates, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 29, 2006.

On December 30, 2006, we adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”) to account for uncertain tax positions. Adoption of FIN 48 did not have any impact on our condensed consolidated statement of income, and the impact on our condensed consolidated balance sheet is summarized in Note 9 – Income Taxes. The application of income tax law is inherently complex. Tax laws and regulations are at times ambiguous, and interpretations of and guidance regarding income tax laws and regulations change over time. This requires us to make many subjective assumptions and judgments regarding our income tax exposure. Changes in our assumptions and judgments can materially affect our condensed consolidated balance sheets, statements of income, and statements of cash flows.

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RESULTS OF OPERATIONS

Sales Overview

We design, manufacture, and market high-performance, high-density programmable logic devices, or PLDs; HardCopy^® structured ASIC devices; pre-defined software design building blocks known as intellectual property cores, or IP cores; and associated development tools.

We classify our products into three categories:

• New products include the Stratix^® II, Stratix II GX, Arria™ GX, Cyclone^® II, Cyclone III, MAX^® II, HardCopy and Hardcopy II devices;

• Mainstream products include the Stratix, Stratix GX, Cyclone, and MAX 3000A devices;

• Mature and other products include the Classic™, MAX 7000, MAX 7000A, MAX 7000B, MAX 7000S, MAX 9000, FLEX^® 6000, FLEX 8000, FLEX 10K, FLEX 10KA, FLEX 10KE, APEX™ 20K, APEX 20KE, APEX 20KC, APEX II, ACEX^® 1K, Mercury™, Excalibur™, configuration and other devices, intellectual property cores, and software and other tools.

Sales for the three and six month periods ending June 29, 2007 were driven by a continuation of four primary business dynamics:

• Strong double-digit growth in new products, more than offsetting declines in the mainstream and mature product categories

• FPGA expansion into new applications across all four major market segments, enabled by advances in technology and performance

• Increasing programmable content in electronic systems and displacement of alternative products

• Rising demand in emerging markets

Sales by Product Category

Sales by product category, as a percentage of total sales, as well as year-over-year and sequential growth or decline for the periods indicated, were as follows:

	Three Months Ended										Six Months Ended
	June 29, 2007		June 30, 2006		March 30, 2007		Year- Over-Year Change		Sequential Change		June 29, 2007		June 30, 2006		Year- Over-Year Change
New	30	%	17	%	25	%	69	%	26	%	28	%	15	%	82	%
Mainstream	32	%	36	%	32	%	-15	%	5	%	32	%	36	%	-11	%
Mature and Other	38	%	47	%	43	%	-23	%	-7	%	40	%	49	%	-18	%
Total Sales	100	%	100	%	100	%	-4	%	5	%	100	%	100	%	0	%

Sales by Market Segment

The following market segment data is derived from data that is provided to us by our distributors and end customers. With a broad base of customers, who in some cases manufacture end products spanning multiple market segments, the assignment of revenue to a market segment requires the use of estimates, judgment, and extrapolation. As such, actual results may differ from those reported.

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Sales by market segment, as a percentage of total sales, as well as year-over-year and sequential growth or decline for the periods indicated, were as follows:

	Three Months Ended										Six Months Ended
	June 29, 2007		June 30, 2006		March 30, 2007		Year- Over-Year Change		Sequential Change		June 29, 2007		June 30, 2006		Year- Over-Year Change
Communications	40	%	44	%	39	%	-12	%	6	%	40	%	44	%	-9	%
Industrial	35	%	34	%	37	%	-2	%	-1	%	36	%	34	%	6	%
Consumer	16	%	13	%	15	%	11	%	11	%	15	%	13	%	15	%
Computer and Storage	9	%	9	%	9	%	-1	%	12	%	9	%	9	%	-3	%
Total Sales	100	%	100	%	100	%	-4	%	5	%	100	%	100	%	0	%

Sales of FPGAs and CPLDs

Our PLDs consist of field-programmable gate arrays, or FPGAs, and complex programmable logic devices, or CPLDs. FPGAs consist of our Stratix, Stratix II, Stratix GX, Stratix II GX, Arria GX, Cyclone, Cyclone II, Cyclone III, APEX, APEX II, FLEX, ACEX, Excalibur, and Mercury families, and CPLDs consist of our MAX, MAX II, and Classic families. Our other products consist of HardCopy, HardCopy II and other masked programmed logic devices, configuration devices, software and other tools and IP cores (collectively, “Other Products”). Our sales of FPGAs and CPLDs, and Other Products as a percentage of total sales, as well as year-over-year and sequential growth or decline for the periods indicated, were as follows:

	Three Months Ended										Six Months Ended
	June 29, 2007		June 30, 2006		March 30, 2007		Year- Over-Year Change		Sequential Change		June 29, 2007		June 30, 2006		Year- Over-Year Change
FPGA	70	%	70	%	72	%	-3	%	3	%	71	%	70	%	1	%
CPLD	19	%	21	%	19	%	-16	%	3	%	19	%	20	%	-8	%
Other Products	11	%	9	%	9	%	16	%	19	%	10	%	10	%	8	%
Total Sales	100	%	100	%	100	%	-4	%	5	%	100	%	100	%	0	%

Sales by Geography

The following table is based on the geographic location of the original equipment manufacturers or the distributors who purchased our products. The geographic location of distributors may be different from the geographic locations of the ultimate end users. Sales by geography, as a percentage of total sales, as well as year-over-year and sequential growth or decline for the periods indicated, were as follows:

	Three Months Ended										Six Months Ended
	June 29, 2007		June 30, 2006		March 30, 2007		Year- Over-Year Change		Sequential Change		June 29, 2007		June 30, 2006		Year- Over-Year Change
North America	21	%	25	%	22	%	-19	%	2	%	22	%	26	%	-16	%
Asia Pacific	33	%	27	%	33	%	19	%	7	%	33	%	25	%	30	%
Europe	25	%	24	%	25	%	-2	%	2	%	25	%	25	%	1	%
Japan	21	%	24	%	20	%	-17	%	9	%	20	%	24	%	-17	%
Total International	79	%	75	%	78	%	1	%	6	%	78	%	74	%	5	%
Total Sales	100	%	100	%	100	%	-4	%	5	%	100	%	100	%	0	%

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Gross Margin

	Three Months Ended						Six Months Ended
	June 29, 2007		June 30, 2006		March 30, 2007		June 29, 2007		June 30, 2006
Gross Margin Percentage	64.6	%	66.1	%	65.7	%	65.2	%	66.4	%

Gross margin rates are heavily influenced by both market segment mix and the timing of material cost improvements. While these variables will continue to fluctuate on a quarterly basis, the company expects to achieve a 65% gross margin over the long term. We believe the 65% gross margin target affords the company the right mix of growth opportunities across all served markets.

Stock-based compensation expense recognized during the quarters ended June 29, 2007 and June 30, 2006 had an immaterial impact on our gross margin.

Research and Development

	Three Months Ended													Six Months Ended
(Dollars in millions)	June 29, 2007			June 30, 2006			March 30, 2007			Year- Over-Year Change		Sequential Change		June 29, 2007			June 30, 2006			Year- Over-Year Change
Research and Development	$	63.1		$	63.9		$	58.5		-1.3	%	7.9	%	$	121.5		$	126.8		-4.2	%
Percentage of Net Sales		20	%		19	%		19	%						19	%		20	%

Research and development expenses include expenditures for labor and benefits, stock-based compensation expense, masks, prototype wafers, depreciation, and the impact on compensation costs of the net investment gain or loss on our Nonqualified Deferred Compensation Plan (“NQDC Plan”). Research and development expenditures were for the design of new PLD and structured ASIC families, and the development of process technologies, new packages, software to support new products and design environments, and IP cores.

Research and development expenses decreased 1.3% and 4.2% for the three and six months ended June 29, 2007 compared to the same period a year ago largely due to a decrease in stock-based compensation expense. Stock-based compensation expense classified as research and development expense was $4.9 million and $10.4 million for the three and six months ended June 29, 2007 compared to $8.0 million and $15.9 million for the three and six months ended June 30, 2006. Research and development expenses also decreased year-over-year due to lower spending on prototype wafers, which decrease was partially offset by higher labor costs from increased headcount.

We will continue to make significant investments in the development of new products throughout 2007 and focus our efforts on the development of new programmable logic devices that use advanced semiconductor wafer fabrication processes, as well as related development software. We are currently investing in the development of our Stratix III and Cyclone III families, as well as our Quartus^® II software, our library of IP cores, and other future products.

Selling, General, and Administrative

	Three Months Ended													Six Months Ended
(Dollars in millions)	June 29, 2007			June 30, 2006			March 30, 2007			Year- Over-Year Change		Sequential Change		June 29, 2007			June 30, 2006			Year- Over-Year Change
Selling, General, and Administrative	$	67.9		$	76.7		$	71.8		-11.5	%	-5.4	%	$	139.6		$	153.0		-8.8	%
Percentage of Net Sales		21	%		23	%		24	%						22	%		24	%

Selling, general, and administrative expenses primarily include labor and benefit expenses related to sales, marketing, and administrative personnel, stock-based compensation expense, commissions and incentives, depreciation, legal, advertising, facilities, travel expenses, and the impact on compensation costs of the net investment gain or loss on our NQDC Plan.

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Selling, general, and administrative expenses decreased 11.5% and 8.8%, respectively, for the three and six months ended June 29, 2007 compared to the same period a year ago primarily as a result of lower stock-based compensation expense, and reduced spending in legal and consulting services and benefit costs, offset in part by increases in labor and the impact on compensation costs of the net investment gain or loss on our NQDC expense. Stock-based compensation expense classified as selling, general, and administrative expense was $7.4 million and $14.7 million for the three and six months ended June 29, 2007, respectively, compared to $10.2 and $20.6 million for the three and six months ended June 30, 2006, respectively. Legal and consulting costs decreased by $3.7 million and $4.1 million, respectively, for the three and six months ended June 29, 2007 as a result of a reduction in costs related to the stock option investigation. Benefit costs declined by $1.1 million and $2.8 million, respectively, for the three and six months ended June 29, 2007 as a result of lower volume-related incentives and bonuses.

During the remainder of 2007, we expect selling, general and administrative expense to continue to decline from 2006 levels due to anticipated additional benefits from the cost improvement efforts started in 2007.

Interest and Other Income, Net

	Three Months Ended													Six Months Ended
(Dollars in millions)	June 29, 2007			June 30, 2006			March 30, 2007			Year- Over-Year Change		Sequential Change		June 29, 2007			June 30, 2006			Year- Over-Year Change
Interest and Other Income, Net	$	18.0		$	10.8		$	17.1		66.7	%	5.3	%	$	35.1		$	23.2		51.3	%
Percentage of Net Sales		6	%		3	%		6	%						6	%		4	%

Interest and other income, net, consists mainly of interest income generated from investments in high-quality fixed income securities, as well as the mark-to-market impact of our NQDC Plan. The year-over-year increases in interest and other income, net, for the three and six months ended June 29, 2007 were driven primarily by increases in interest income as a result of higher investment yields and higher average cash and investment balances.

During the three months ended June 29, 2007, the NQDC Plan experienced a net investment gain of $3.0 million. This gain resulted in a $3.0 million favorable impact to other income and an unfavorable impact to operating expenses, increasing research and development expenses by $1.6 million and increasing selling, general and administrative expenses by $1.4 million. During the six months ended June 29, 2007, the NQDC Plan experienced a net investment gain of $4.2 million. This gain resulted in a $4.2 million favorable impact to other income and an unfavorable impact to operating expenses, increasing compensation expense by $4.2 million.

During the three months ended June 30, 2006, the NQDC Plan experienced a net investment loss of $1.0 million. This loss resulted in a $1.0 million unfavorable impact to other income and a favorable impact to operating expenses, decreasing selling, general and administrative expenses by $0.6 million and decreasing research and development expenses by $0.4 million. During the six months ended June 30, 2006, the NQDC Plan experienced a net investment gain of $1.3 million. This gain resulted in a $1.3 million favorable impact to other income and an unfavorable impact to operating expenses, increasing compensation expense by $1.3 million.

There was no impact to income before income taxes, net income or cash balances. See “Note 10 – Nonqualified Deferred Compensation Plan” in the accompanying notes to the condensed consolidated financial statements for background information regarding the NQDC Plan.

Provision for Income Taxes

Our effective tax rate for the three and six months ended June 29, 2007 was 14%, compared with 15% for the three and six months ended June 30, 2006. The decrease in our effective tax rate was primarily due to the reinstatement in December 2006 of the federal R&D tax credit. Our effective tax rate reflects the impact of significant amounts of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory rate.

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We adopted the provisions of FIN 48 on December 30, 2006, the first day of our 2007 fiscal year. The adoption of FIN 48 did not have any impact on our condensed consolidated statement of income. The effect of adoption of FIN 48 on our condensed consolidate balance sheet as at June 29, 2007 is summarized in Note 9 – Income Taxes.

Financial Condition, Liquidity, and Capital Resources

(in thousands)	June 29, 2007			Dec. 29, 2006
Cash and cash equivalents	$	691,563		$	738,412
Short-term investments		478,250			625,335
Long-term investments		134,921			256,563
Total cash, cash equivalents, and investments	$	1,304,734		$	1,620,310
	Six Months Ended
(in thousands)	June 29, 2007			June 30, 2006
Net cash provided by operating activities	$	67,126		$	195,325
Net cash provided by (used for) investing activities		249,218			(269,834	)
Net cash (used for) provided by financing activities		(363,193	)		373
Net decrease in cash and cash equivalents	$	(46,849	)	$	(74,136	)

Liquidity

We derive our liquidity and capital resources primarily from our cash flows from operations. We continue to generate positive operating cash flows. We currently use cash generated from operations for capital expenditures, investments and repurchases of our common stock. Based on past performance and current expectations, we believe our current available sources of funds including cash, cash equivalents, and investments, plus the anticipated cash generated from operations, will be adequate to finance our operations and capital expenditures for at least the next year.

During the six months ended June 29, 2007, we spent $461.6 million to repurchase shares of our common stock, compared to $53.1 million for the six months ended June 30, 2006. We also spent $18.9 million on capital expenditures during the six months ended June 29, 2007, compared to $16.2 million in the six months ended June 30, 2006. The increase was due primarily to the implementation of a new enterprise resource planning (“ERP”) system. As of the date of this filing, we have spent approximately $33 million on the ERP project and total planned expenditures are estimated to be approximately $35 million. The ERP system became operational in July of 2007. We also plan to continue to use a portion of our available capital to repurchase shares of our common stock.

On March 28, 2007, our board of directors declared a quarterly cash dividend of $0.04 per common share paid on June 1, 2007 to stockholders of record on May 10, 2007. The total dividend paid was $14.2 million. On July 20, 2007, our board of directors declared a cash dividend of $0.04 per common share for the second quarter of fiscal year 2007 payable on September 4, 2007 to stockholders of record on August 10, 2007. Our dividend policy could be impacted in the future by, among other items, our views on potential future capital requirements relating to research and development, investments and acquisitions, legal risks, common stock repurchases, and other strategic investments.

The company is currently negotiating a financing commitment letter to provide a long-term credit facility of up to $750 million. If finalized, the company’s current intention is to draw $500 million from this facility and use the proceeds to repurchase its common stock. The company would then intend to repurchase up to $1.5 billion of its common stock from the beginning of 2007 through the first half of 2008.

Cash Flows

Our positive cash flows from operating activities for the six months ended June 29, 2007 were primarily attributable to net income of $155.6 million, adjusted for non-cash items including stock-based compensation expense of $25.7 million, depreciation and amortization of $15.2 million, partially offset by cash outflows of $119.3 million primarily from changes in our working capital, excluding cash. Non-cash working capital changes primarily included a $24.3 million decrease in deferred income and allowances on sales to distributors, a $20.0 million decrease in accounts payable and accrued liabilities, a $95.2 million increase in accounts receivable, a $4.9 million decrease in inventory, a $4.3 million increase in other assets, and an increase in income taxes payable of $19.5 million.

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Cash provided by investing activities for the six months ended June 29, 2007 primarily consisted of proceeds from the maturities and sales of available-for-sale investments of $363.3 million, partially offset by purchases of available-for-sale investments of $95.0 million.

Cash used for financing activities for the six months ended June 29, 2007 primarily consisted of repurchases of our common stock of $461.6 million and payment of dividends to stockholders of $14.2 million, partially offset by proceeds of $ 95.6 million from the issuance of common stock to employees through stock option exercises.

Purchase Obligations; Commitments and Contingencies

We depend entirely upon subcontractors to manufacture our silicon wafers and provide assembly and test services. Due to lengthy subcontractor lead times, we must order these materials and services from these subcontractors well in advance, and we are obligated to pay for the materials and services once they are completed. As of June 29, 2007, we had approximately $122.7 million of outstanding purchase commitments to such subcontractors. We expect to receive and pay for these materials and services within the next four to six months.

We also lease facilities under non-cancelable lease agreements expiring at various times through 2015. There have been no significant changes to our operating lease obligations since our 2006 fiscal year end. The balance of our capital lease obligations included in accrued and other non-current liabilities was $3.5 million as of June 29, 2007 and $3.9 million as of December 29, 2006. Amortization expense related to assets acquired under capital leases was $1.1 million and $1.9 million, respectively, for the three and six months ended June 29, 2007.

In addition to these leases and purchase obligations, in the normal course of business, we enter into a variety of agreements and financial commitments. It is not possible to predict the maximum potential amount of future payments under these agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments pursuant to such agreements have not been material. We believe that any future payments required pursuant to such agreements would not be material to our condensed consolidated balance sheet or statement of income.

As discussed in Note 9 – Income Taxes, we adopted the provisions of FIN 48 on December 30, 2006. At June 29, 2007 we had a liability for unrecognized tax benefits and an accrual for the payment of related interest and penalties totaling $153.4 million of which none is expected to be paid within the next 12 months. The company is unable to make a reasonable estimate as to when cash settlement with a taxing authority will occur.

Impact of Currency Translation and Inflation

Although we purchase the majority of our materials and services in U.S. dollars and sell our products to OEMs and distributors in U.S. dollars, we do have international operations and are, therefore, subject to foreign currency rate exposure. For non-U.S. subsidiaries and branches that have assets and liabilities in local currencies, the impact of the remeasurement of these local currencies into U.S. dollars for the three months ended June 29, 2007 and June 30, 2006 was immaterial. As of June 29, 2007, we had no open forward contracts.

Common Stock Repurchases

On March 28, 2007, our board of directors approved a 50 million share increase in the number of shares authorized for repurchase under our common stock repurchase program. Since the inception of our common stock repurchase program on July 15, 1996 through June 29, 2007, we have repurchased a total of 114.9 million shares of our common stock for an aggregate cost of $2.4 billion. All shares were retired upon acquisition. On June 29, 2007, 43.1 million shares remained authorized for repurchase under our common stock repurchase program.

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Share repurchase activities for the three and six months ended June 29, 2007 and June 30, 2006 were as follows:

	Three Months Ended				Six Months Ended
(in thousands, except per share amounts)	June 29, 2007		June 30, 2006		June 29, 2007		June 30, 2006
Shares repurchased		14,078		448		21,245		2,666
Cost of shares repurchased	$	316,225	$	9,403	$	461,601	$	53,068
Average price per share	$	22.46	$	20.99	$	21.73	$	19.91

Off-Balance Sheet Arrangements

We do not have any financial partnerships with unconsolidated entities, such as entities often referred to as structured finance or special purpose entities.

Recent Accounting Pronouncements

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). This statement expands the standards under SFAS No. 157, “Fair Value Measurements”, to provide entities a one-time election (Fair Value Option or FVO) to measure financial instruments and certain other items at fair value. Most of the provisions of this statement apply only to entities that elect the fair value option. The provisions of SFAS 159 are applicable only to certain financial instruments and are effective for fiscal years beginning after November 15, 2007. We are currently assessing the impact of SFAS 159 on our condensed consolidated balance sheets, statements of income and statements of cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of SFAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. SFAS 157 is effective for fiscal years and interim periods beginning after November 15, 2007. We do not believe that the adoption of the provisions of SFAS 157 will materially impact our condensed consolidated balance sheets, statements of income and statements of cash flows.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of SFAS 109” (“FIN 48”). FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file in a particular jurisdiction. FIN 48 is effective for fiscal years beginning after December 15, 2006. We adopted the provisions of FIN 48 on December 30, 2006, the first day of our 2007 fiscal year. On May 2, 2007 the FASB issued FASB staff position No. FIN 48-1 “Definition of Settlement in FASB Interpretation No. 48-1” (“FSP FIN 48-1”). FSP FIN 48-1 provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The adoption of FIN 48 did not have any impact on our condensed consolidated statement of income. The effect of adoption of FIN 48 on our condensed consolidated balance sheet as at June 29, 2007 is summarized in Note 9 – Income Taxes.

Subsequent Events

The Company is currently negotiating a financing commitment letter to provide a long-term credit facility of up to $750 million. If finalized, the company’s current intention is to draw $500 million from this facility and use the proceeds to repurchase its common stock. The company would then intend to repurchase up to a total of $1.5 billion of its common stock from the beginning of 2007 through the first half of 2008.

On July 24, 2007, the company filed with the SEC a Tender Offer Statement on Schedule TO. The company is offering certain optionees the opportunity to amend the stock option grant made on December 20, 2000 to include new restrictions on exercisability in order to limit the potential adverse personal tax consequences that may apply to a portion of the grant under Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations issued by the U.S. Internal Revenue Service thereunder.

On July 20, 2007, our board of directors declared a cash dividend of $0.04 per common share for the second quarter of fiscal year 2007, payable on September 4, 2007 to stockholders of record on August 10, 2007.

On July 2, 2007, we implemented a new enterprise resource planning (“ERP”) system.

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ITEM 3: Quantitative and Qualitative Disclosures About Market Risk

Investment and Interest Rate Risk

The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. We maintain investment portfolio holdings of various issuers, types and maturity dates totaling $1.3 billion as of June 29, 2007. The market value of these investments on any given day during the investment term may vary as a result of market interest rate fluctuations. A hypothetical 10% movement in interest rates during the investment term would not likely have a material impact on the fair value of the portfolio. The actual impact on the fair value of the portfolio in the future may differ materially from this analysis, depending on actual balances and changes in the timing and the amount of interest rate movements.

Our net income is dependent on, among other factors, interest income and realized gains from the sale of marketable securities. If the interest rate declines or we are unable to realize gains from the sale of marketable securities, our net income may be negatively impacted.

Foreign Currency Risk

Although we purchase the majority of our materials and services in U.S. dollars and sell our products to OEMs and distributors in U.S. dollars, we do have international operations and are, therefore, subject to foreign currency rate exposure. To date, our exposure to exchange rate volatility has been insignificant. If foreign currency rates were to fluctuate by 10% from rates at June 29, 2007, our financial position, results of operations and cash flows would not be materially affected. However, we cannot assure that there will not be a material impact in the future.

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ITEM 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as amended, as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”).

The purpose of this evaluation was to determine if, as of the Evaluation Date, our disclosure controls and procedures were designed and operating effectively to provide reasonable assurance that the information relating to Altera, required to be disclosed in our Exchange Act filings (i) was recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a – 15(f) and 15(d) – 15(f) under the Exchange Act) occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In July 2007, we implemented a new enterprise resource planning (“ERP”) system. The implementation of the ERP system represents a material change in our internal controls over financial reporting in our third fiscal quarter of 2007. Post-implementation reviews are being conducted by management to ensure that internal controls surrounding the system implementation process, key applications, and the financial close process were properly designed and are operating effectively to prevent material financial statement errors.

Limitation on Effectiveness of Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. The design of any control system is based, in part, upon the benefits of the control system relative to its costs. Control systems can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies and procedures may deteriorate. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.

PART II OTHER INFORMATION

ITEM 1: Legal Proceedings

We have been named as a party to several lawsuits concerning our historical stock option practices and related accounting and reporting.

In May and July 2006, we were notified that three shareholder derivative lawsuits had been filed in the Superior Court of the State of California, County of Santa Clara, by persons identifying themselves as Altera shareholders and purporting to act on behalf of Altera, naming Altera Corporation as a nominal defendant and naming some of our current and former officers and directors as defendants. On July 12, 2006, one of these derivative actions was voluntarily dismissed by the plaintiff shareholder. The remaining two derivative lawsuits pending in Santa Clara Superior Court were consolidated into a single action on September 5, 2006. Plaintiffs filed a second amended consolidated complaint on December 15, 2006. On January 30, 2007, Altera and the defendants filed a motion to stay this action pending resolution of the federal derivative action (discussed below). There were no material developments in this action during the quarter ended June 29, 2007.

The consolidated California state court action names Altera Corporation as a nominal defendant and the following current and former Altera officers and directors as defendants: John P. Daane, Nathan M. Sarkisian, Denis M. Berlan, Robert W. Reed, Robert J. Finocchio, Jr., Kevin McGarity, Paul Newhagen, William E. Terry, Susan Wang, Charles M. Clough, Rodney Smith, Michael B. Jacobs, Katherine E. Schuelke, Deborah Reiman, Michael J. Ellison, C. Wendell Bergere, Clive McCarthy, and Peter Smyth. Plaintiffs assert claims against these individual defendants for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, unjust enrichment, violations of California Corporation Code sections 25402 and 25403, breach of fiduciary duty for insider selling and misappropriation of information, rescission, constructive trust, accounting, and deceit. Plaintiffs’ claims concern the granting of stock options by Altera between 1994 and

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2001 and the alleged filing of false and misleading financial statements between 1994 and 2006. All of these claims are asserted derivatively on behalf of Altera. Plaintiffs seek, among other relief, an indeterminate amount of damages from the individual defendants and a judgment directing Altera to reform its corporate governance practices.

During the months of May, June, and July 2006, four other derivative lawsuits were filed by purported Altera shareholders, on behalf of Altera, in the United States District Court for the Northern District of California. On August 8, 2006, these actions were consolidated, and the plaintiffs filed a consolidated complaint on November 30, 2006. Altera moved to dismiss this action for lack of standing on January 29, 2007. There were no material developments in this action during the quarter ended June 29, 2007.

Among the defendants named in these derivative actions are Altera Corporation as a nominal defendant and the following current and former officers and directors of Altera: John P. Daane, Nathan M. Sarkisian, Denis M. Berlan, Robert W. Reed, Robert J. Finocchio, Jr., Kevin McGarity, Paul Newhagen, William E. Terry, Susan Wang, Charles M. Clough, Rodney Smith, Michael B. Jacobs, Katherine E. Schuelke, John R. Fitzhenry, Deborah Reiman, Michael J. Ellison, C. Wendell Bergere, Clive McCarthy, and Peter Smyth. The consolidated complaint includes claims for violations of Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934, breach of fiduciary duty, corporate waste, gross mismanagement, unjust enrichment, abuse of control, insider selling and misappropriation of information, rescission, accounting, and violations of California Corporation Code sections 25402 and 25502.5. Plaintiffs’ claims concern the granting of stock options by Altera between 1995 and 2001 and the alleged filing of false and misleading financial statements between 1996 and 2005.

ITEM 1A: Risk Factors

There have been no material changes from the risk factors previously described under Item 1A of our Annual Report on Form 10-K for the year ended December 29, 2006. For additional information regarding risk factors, please refer to the description of the risk factors associated with our business previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 29, 2006, incorporated herein by reference.

Before you decide to buy, hold, or sell our common stock, you should carefully consider the risks described in Item 1A of our Annual Report on Form 10-K for the year ended December 29, 2006 and the other information contained elsewhere in this report. These risks are not the only risks facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. Our business, financial condition, and results of operation could be seriously harmed if any of the events underlying any of these risks or uncertainties actually occurs. In that event, the market price for our common stock could decline, and you may lose all or part of your investment.

ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds

Items 2(a) and 2(b) are inapplicable.

(c) Issuer Purchases of Equity Securities

During the second quarter of 2007, we repurchased shares of our common stock as follows:

Period (in thousands except footnotes and price per share amounts)	Total Number of Shares Purchased(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Increase of Shares Authorized for Repurchase	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
3/31/07 - 4/27/07	2,335	$	20.24	2,335	—	54,793
4/28/07 - 5/25/07	5,529	$	23.22	5,529	—	49,264
5/26/07 - 6/29/07	6,214	$	22.62	6,214	—	43,050
	14,078			14,078

⁽¹⁾ No shares were purchased outside of publicly announced plans or programs.

We repurchase shares of our common stock under the program announced on July 15, 1996 that has no specified expiration. On March 28, 2007, our board of directors approved a 50 million share increase in the number of shares authorized for repurchase under our stock repurchase program. As of June 29, 2007, the board of directors has authorized, since the inception of the program, a total of 158.0 million shares for repurchase. No existing repurchase plans or programs expired, nor have we decided to terminate any repurchase plans or programs prior to expiration. There are no existing plans or programs under which we do not intend to make further purchases.

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ITEM 4: Submission of Matters to a Vote of Security Holders

We held our Annual Meeting of Stockholders on May 8, 2007 at 4:00 p.m. The following matters were acted upon at the meeting:

1.	Election of Directors to serve until the next annual meeting of stockholders or until their successors are elected.
	NOMINEES	FOR	AGAINST	ABSTAIN
	John P. Daane	325,429,315	3,440,492	6,598,823
	Robert W. Reed	321,706,427	7,089,797	6,672,406
	Robert J. Finocchio, Jr.	324,241,975	4,509,596	6,717,059
	Kevin McGarity	324,589,426	4,243,965	6,635,239
	John Shoemaker	326,607,568	2,207,140	6,653,922
	Susan Wang	323,649,382	5,167,413	6,651,835
		FOR	AGAINST	ABSTAIN	BROKER “NON- VOTES”
2.	Approval of an amendment to the 1987 Employee Stock Purchase Plan to increase by 1,000,000 the number of shares of common stock reserved for issuance under the plan.	292,940,700	9,093,463	6,586,825	26,847,642
3.	Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 28, 2007.	325,336,540	3,523,361	6,608,739	—

ITEM 5: Other Information

1987 Employee Stock Purchase Plan

At our 2007 Annual Meeting of Stockholders, held on May 8, 2007, our stockholders approved an amendment to our 1987 Employee Stock Purchase Plan to increase the number of shares reserved for issuance by 1 million thereby increasing the total number of shares issuable under the plan from 20,700,000 to 21,700,000.

The foregoing summary of 1987 Employee Stock Purchase Plan is not intended to be complete, and is qualified in its entirety by reference to the amended 1987 Employee Stock Purchase Plan, which is filed as Exhibit 10.2 to this Report.

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ITEM 6: Exhibits

Exhibit No.	Description
#10.2+	1987 Employee Stock Purchase Plan, as amended May 8, 2007.
#10.15+	1996 Stock Option Plan, as amended December 18, 2006.
#31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
#31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
#32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
#32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

# Filed herewith.

+ Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Report on Form 10-Q pursuant to Item 6 thereof.

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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 thereunto duly authorized.

ALTERA CORPORATION
By:	/s/ TIMOTHY R. MORSE
	Timothy R. Morse Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description
#10.2+	1987 Employee Stock Purchase Plan, as amended May 8, 2007.
#10.15+	1996 Stock Option Plan, as amended December 18, 2006.
#31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
#31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
#32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
#32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

# Filed herewith.

+ Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Report on Form 10-Q pursuant to Item 6 thereof.

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EX-10.2

EXHIBIT 10.2

ALTERA CORPORATION

1987 EMPLOYEE STOCK PURCHASE PLAN

(as amended and restated May 8, 2007)

The following constitute the provisions of the 1987 Employee Stock Purchase Plan, as amended and restated May 8, 2007, of Altera Corporation.

1. Purpose. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an “Employee Stock Purchase Plan” under Section 423 of the Internal Revenue Code. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a uniform and nondiscriminatory basis consistent with the requirements of Section 423.

2. Definitions.

(a) “Administrator” shall mean the Board or any Committee designated by the Board to administer the plan pursuant to Section 15 of the Plan.

(b) “Board” shall mean the Board of Directors of the Company.

(c) “Change of Control” shall mean the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or

(iii) The consummation of a merger or consolidation of the Company, with any other corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company, or such surviving entity or its parent outstanding immediately after such merger or consolidation.

(iv) A change in the composition of the Board, as a result of which fewer than a majority of the Directors are Incumbent Directors. “Incumbent Directors” shall

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mean Directors who either (A) are Directors of the Company, as applicable, as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of those Directors whose election or nomination was not in connection with any transaction described in subsections (i), (ii) or (iii) or in connection with an actual or threatened proxy contest relating to the election of directors of the Company.

(d) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(e) “Committee” means a committee of the Board appointed by the Board in accordance with Section 15 hereof.

(f) “Common Stock” shall mean the common stock of the Company.

(g) “Company” shall mean Altera Corporation, a Delaware corporation.

(h) “Compensation” shall mean all base straight time gross earnings, sales commissions and sales incentives, but exclusive of payments for overtime, shift premiums, other incentive payments, bonuses or other compensation.

(i) “Designated Subsidiary” shall mean any Subsidiary selected by the Administrator as eligible to participate in the Plan.

(j) “Eligible Employee” shall mean any individual who is a common law employee of the Company or any Designated Subsidiary and whose customary employment with the Company or Designated Subsidiary is at least twenty (20) hours per week and more than five (5) months in any calendar year. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company. Where the period of leave exceeds 90 days and the individual’s right to reemployment is not guaranteed either by statute or by contract, the individual shall be deemed to have withdrawn from the Plan on the 91st day of such leave.

(k) “Exercise Date” shall mean the Trading Day on or before April 30th and October 31st of each year.

(l) “Fair Market Value” shall mean, as of any date, the value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable;

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(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board; or

(iv) For purposes of the Offering Date of the first Offering Period under the Plan, the Fair Market Value shall be the initial price to the public as set forth in the final prospectus included within the registration statement in Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Company’s Common Stock (the “Registration Statement”).

(m) “Offering Date” shall mean the first Trading Day of each Offering Period.

(n) “Offering Periods” shall mean the periods of approximately twelve (12) months during which an option granted pursuant to the Plan may be exercised, usually commencing on the first Trading Day on or after May 1st and November 1st of each year and terminating on the Trading Day on or before April 30th and October 31st. The duration and timing of Offering Periods may be changed pursuant to Section 4 of this Plan.

(o) “Plan” shall mean this Employee Stock Purchase Plan.

(p) “Purchase Period” shall mean the approximately six (6) month period commencing on one Exercise Date and ending with the next Exercise Date, except that the first Purchase Period of any Offering Period shall commence on the Offering Date and end with the next Exercise Date.

(q) “Purchase Price” shall mean 85% of the Fair Market Value of a share of Common Stock on the Offering Date or on the Exercise Date, whichever is lower; provided however, that the Purchase Price may be adjusted by the Administrator pursuant to Section 20.

(r) “Subsidiary” shall mean a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

(s) “Trading Day” shall mean a day on which national stock exchanges and the Nasdaq System are open for trading.

3. Eligibility.

(a) Subsequent Offering Periods. Any Eligible Employee on a given Offering Date shall be eligible to participate in the Plan.

(b) Limitations. Any provisions of the Plan to the contrary notwithstanding, no Eligible Employee shall be granted an option under the Plan (i) to the extent that, immediately after the grant, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or

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more of the total combined voting power or value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans of the Company and its subsidiaries accrues at a rate that exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the Fair Market Value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time.

4. Offering Periods. The Plan shall be implemented by consecutive, overlapping Offering Periods with a new Offering Period commencing on the first Trading Day on or after May 1^st and November 1^st each year, or on such other date as the Board shall determine, and continuing thereafter until terminated in accordance with Section 21 hereof. The Board shall have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without shareholder approval if such change is announced prior to the scheduled beginning of the first Offering Period to be affected thereafter.

5. Subsequent Offering Periods. An Eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions in the form of Exhibit A to this Plan and filing it with the Company’s Stock Administration Department prior to the applicable Offering Date.

6. Payroll Deductions.

(a) At the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each pay day during the Offering Period in an amount not exceeding 10% of the Compensation that he or she receives on each pay day during the Offering Period; provided, however, that should a pay day occur on an Exercise Date, a participant shall have the payroll deductions made on such day applied to his or her account under the new Offering Period or Purchase Period, as the case may be. A participant’s subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 11 hereof.

(b) Payroll deductions for a participant shall commence on the first payday following the Offering Date and shall end on the last payday in the Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 11 hereof.

(c) All payroll deductions made for a participant shall be credited to his or her account under the Plan and shall be withheld in whole percentages only. A participant may not make any additional payments into such account.

(d) A participant may discontinue his or her participation in the Plan as provided in Section 11 hereof, or decrease the rate of his or her payroll deductions during the Offering Period by completing or filing with the Company a new subscription agreement authorizing a change in payroll deduction rate. A participant may increase his or her rate of payroll deductions only for a subsequent Offering Period in which he or she is scheduled to participate and may not increase his or her rate of payroll deductions during an outstanding Offering Period in which such participant

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is currently participating. The Administrator may, in its discretion, limit the nature and/or number of participation rate changes during any Offering Period. Any decrease in rate shall be effective fifteen (15) days following the Company’s receipt of the notification.

(e) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, the Administrator may decrease a participant’s payroll deductions to zero percent (0%) at any time during a Purchase Period. Payroll deductions shall recommence at the rate provided in such participant’s subscription agreement at the beginning of the first Purchase Period that is scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 11 hereof.

(f) At the time the option is exercised, in whole or in part, or at the time some or all of the Company’s Common Stock issued under the Plan is disposed of, the participant must make adequate provision for the Company’s federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the participant’s compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Eligible Employee.

7. Grant of Option. On the Offering Date of each Offering Period, each Eligible Employee participating in such Offering Period shall be granted an option to purchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of the Company’s Common Stock determined by dividing such Eligible Employee’s payroll deductions accumulated prior to such Exercise Date and retained in the Participant’s account as of the Exercise Date by the applicable Purchase Price; provided that in no event shall an Eligible Employee be permitted to purchase during each Purchase Period more than 10,000 shares of the Company’s Common Stock (subject to any adjustment pursuant to Section 20 hereof), and provided further that such purchase shall be subject to the limitations set forth in Section 3(b) and other sections of the Plan that may limit such number. The Eligible Employee may accept the grant of such option by turning in a completed Subscription Agreement to the Company on or prior to an Offering Date. The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of the Company’s Common Stock an Eligible Employee may purchase during each Purchase Period of such Offering Period. Exercise of the option shall occur as provided in Section 9 hereof, unless the participant has withdrawn pursuant to Section 11 hereof. The option shall expire on the last day of the Offering Period.

8. Automatic Transfer to Low Price Offering Period. To the extent permitted by any applicable laws, regulations, or stock exchange rules, if the Fair Market Value of the Common Stock on any Exercise Date in an Offering Period is lower than the Fair Market Value of the Common Stock on the Offering Date of such Offering Period, then all participants in such Offering Period shall be automatically withdrawn from such Offering Period immediately after the exercise of their option on such Exercise Date and automatically re-enrolled in the immediately following Offering Period.

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9. Exercise of Option.

(a) Unless a participant withdraws from the Plan as provided in Section 11 hereof, his or her option for the purchase of shares shall be exercised automatically on the Exercise Date, and the maximum number of full shares subject to option shall be purchased for such participant at the applicable Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares shall be purchased; any payroll deductions accumulated in a participant’s account that are not sufficient to purchase a full share shall be retained in the participant’s account for the subsequent Purchase Period or Offering Period, subject to earlier withdrawal by the participant as provided in Section 11 hereof. Any other funds left over in a participant’s account after the Exercise Date shall be returned to the participant. During a participant’s lifetime, a participant’s option to purchase shares hereunder is exercisable only by him or her.

(b) If the Administrator determines that, on a given Exercise Date, the number of shares with respect to which options are to be exercised may exceed (i) the number of shares of Common Stock that were available for sale under the Plan on the Offering Date of the applicable Offering Period, or (ii) the number of shares available for sale under the Plan on such Exercise Date, the Administrator may in its sole discretion (1) provide that the Company shall make a pro rata allocation of the shares of Common Stock available for purchase on such Offering Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and continue all Offering Periods then in effect, or (2) provide that the Company shall make a pro rata allocation of the shares available for purchase on such Offering Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and terminate any or all Offering Periods then in effect pursuant to Section 21 hereof. The Company may make pro rata allocation of the shares available on the Offering Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional shares for issuance under the Plan by the Company’s shareholders subsequent to such Offering Date.

10. Delivery. As soon as reasonably practicable after each Exercise Date on which a purchase of shares occurs, the Company shall arrange the delivery to each participant the shares purchased upon exercise of his or her option in a form determined by the Administrator.

11. Withdrawal.

(a) A participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by giving written notice to the Company. All of the participant’s payroll deductions credited to his or her account shall be paid to such participant promptly after receipt of notice of withdrawal and such participant’s option for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of shares shall be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the succeeding Offering Period unless the participant delivers to the Company a new Subscription Agreement.

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(b) A participant’s withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan that may hereafter be adopted by the Company or in succeeding Offering Periods that commence after the termination of the Offering Period from which the participant withdraws.

12. Termination of Employment. In the event a participant ceases to be an Eligible Employee prior to the Exercise Date of the Offering Period in question for any reason, including retirement or death, the payroll deductions credited to the participant’s account will be returned to the participant, or in the case of the participant’s death, to the person or persons entitled thereto pursuant to Section 16 of the Plan, and the participant’s option will automatically terminate.

13. Interest. No interest shall accrue on the payroll deductions of a participant in the Plan.

14. Stock.

(a) Subject to adjustment upon changes in capitalization of the Company as provided in Section 20 hereof, the maximum number of shares of the Company’s Common Stock that shall be made available for sale under the Plan shall be 21,700,000.

(b) Until the shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), a participant shall only have the rights of an unsecured creditor with respect to such shares, and no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to such shares.

(c) Shares to be delivered to a participant under the Plan shall be registered in the name of the participant or in the name of the participant and his or her spouse.

15. Administration. The Administrator shall administer the Plan and shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding, decision and determination made by the Administrator shall, to the full extent permitted by law, be final and binding upon all parties.

16. Designation of Beneficiary.

(a) Unless otherwise prohibited by applicable law, a participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant’s account under the Plan in the event of such participant’s death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant’s account under the Plan in the event of such participant’s death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective.

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(b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant’s death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

(c) All beneficiary designations shall be in such form and manner as the Administrator may designate from time to time.

17. Transferability. Neither payroll deductions credited to a participant’s account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 16 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 11 hereof.

18. Use of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions. Until shares are issued, participants shall only have the rights of an unsecured creditor.

19. Reports. Individual accounts shall be maintained for each participant in the Plan. Statements of account shall be given to participating Eligible Employees at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining cash balance, if any.

20. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Change of Control.

(a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the maximum number of shares of the Company’s Common Stock that shall be made available for sale under the Plan, the maximum number of shares each participant may purchase each Purchase Period (pursuant to Section 7), as well as the price per share and the number of shares of Common Stock covered by each option under the Plan that have not yet been exercised, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other change in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to

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have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option.

(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Offering Period then in progress shall be shortened by setting a new Exercise Date (the “New Exercise Date”), and shall terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Administrator. The New Exercise Date shall be before the date of the Company’s proposed dissolution or liquidation. The Administrator shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant’s option has been changed to the New Exercise Date and that the participant’s option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 11 hereof.

(c) Merger or Change of Control. In the event of a merger or Change of Control, each outstanding option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the option, any Purchase Periods then in progress shall be shortened by setting a New Exercise Date and any Offering Periods then in progress shall end on the New Exercise Date. The New Exercise Date shall be before the date of the Company’s proposed merger or Change of Control. The Administrator shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant’s option has been changed to the New Exercise Date and that the participant’s option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 11 hereof.

21. Amendment or Termination.

(a) The Administrator may at any time and for any reason terminate or amend the Plan. Except as otherwise provided in the Plan, no such termination can affect options previously granted, provided that an Offering Period may be terminated by the Administrator on any Exercise Date if the Administrator determines that the termination of the Offering Period or the Plan is in the best interests of the Company and its shareholders. Except as provided in Section 20 and this Section 21 hereof, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule), the Company shall obtain shareholder approval in such a manner and to such a degree as required.

(b) Without shareholder consent and without regard to whether any participant rights may be considered to have been “adversely affected,” the Administrator shall be entitled to

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change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant’s Compensation, and establish such other limitations or procedures as the Administrator determines in its sole discretion advisable which are consistent with the Plan.

(c) In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to:

(i) increasing the Purchase Price for any Offering Period, including an Offering Period underway at the time of the change in Purchase Price;

(ii) shortening any Offering Period so that Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Board action; and

(iii) allocating shares.

Such modifications or amendments shall not require stockholder approval or the consent of any Plan participants.

22. Notices. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form and manner specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

23. Conditions Upon Issuance of Shares. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

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24. Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the shareholders of the Company. It shall continue in effect until terminated under Section 21 hereof.

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EX-10.15

EXHIBIT 10.15

ALTERA CORPORATION

1996 STOCK OPTION PLAN

(As amended December 18, 2006)

1. Purposes of the Plan. The purposes of this Stock Option Plan are:

• to attract and retain the best available personnel for positions of substantial responsibility,

• to provide additional incentive to Employees, and

• to promote the success of the Company’s business.

Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant.

2. Definitions. As used herein, the following definitions shall apply:

(a) “Administrator” means the Board or any Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.

(b) “Applicable Laws” means the legal requirements relating to the administration of stock option plans under U. S. state corporate laws, U.S. federal and state securities laws, the Code and the applicable laws of any foreign country or jurisdiction where Options are, or will be, granted under the Plan.

(c) “Board” means the Board of Directors of the Company.

(d) “Code” means the Internal Revenue Code of 1986, as amended.

(e) “Committee” means a Committee appointed by the Board in accordance with Section 4 of the Plan.

(f) “Common Stock” means the Common Stock of the Company.

(g) “Company” means Altera Corporation, a Delaware corporation.

(h) “Continuous Status as an Employee” means that the employment relationship with the Company, any Parent, or Subsidiary, is not interrupted or terminated. Continuous Status as an Employee shall not be considered interrupted in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or

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between the Company, its Parent, any Subsidiary, or any successor. A leave of absence approved by the Company shall include sick leave, military leave, or any other personal leave approved by an authorized representative of the Company. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.

(i) “Director” means a member of the Board.

(j) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

(k) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

(l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(m) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.

(n) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

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(o) “Misconduct” means the commission of any act that is inimical, contrary, or harmful to the interests of the Company (or any Parent or Subsidiary), including but not limited to (1) conduct related to employment for which either criminal or civil penalties may be sought, (2) willful violation of the Company’s written policies, (3) engaging in any activity that is in competition with the Company (or any Parent or Subsidiary), or (4) unauthorized disclosure of confidential information or trade secrets of the Company (or any Parent or Subsidiary). The foregoing definition shall not be deemed to be inclusive of all acts or omissions that the Company (or any Parent or Subsidiary) may consider as Misconduct for purposes of the Plan.

(p) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

(q) “Notice of Grant” means a written notice evidencing certain terms and conditions of an individual Option grant. The Notice of Grant is part of the Option Agreement.

(r) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(s) “Option” means a stock option granted pursuant to the Plan.

(t) “Option Agreement” means a written agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.

(u) “Optioned Stock” means the Common Stock subject to an Option.

(v) “Optionee” means an Employee who holds an outstanding Option.

(w) “Parent” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.

(x) “Plan” means this 1996 Stock Option Plan.

(y) “Retirement” means:

(i) a termination of Optionee’s Continuous Status as an Employee, other than for Misconduct, after attaining age fifty-five (55) with at least ten (10) years of service as an Employee of the Company; or

(ii) a termination of Optionee’s Continuous Status as an Employee as a result of Disability, regardless of Optionee’s age, if Optionee has completed at least ten (10) years of service as an Employee of the Company and if Optionee qualifies for Social Security disability benefits at the time of such termination.

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(z) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(aa) “Section 16” means Section 16 of the Securities Exchange Act of 1934, as amended.

(bb) “Share” means a share of the Common Stock, as adjusted in accordance with Section 12 of the Plan.

(cc) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 86,000,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.

If an Option expires or becomes unexercisable without having been exercised in full, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan shall not be returned to the Plan and shall not become available for future distribution under the Plan.

4. Administration of the Plan.

(a) Procedure.

(i) Multiple Administrative Bodies. If permitted by Rule 16b-3, the Plan may be administered by different bodies with respect to Directors, Officers who are not Directors, and Employees who are neither Directors nor Officers.

(ii) Administration With Respect to Directors and Officers Subject to Section 16. With respect to Option grants made to Employees who are also Officers or Directors subject to Section 16 of the Exchange Act, the Plan shall be administered by (A) the Board, if the Board may administer the Plan in a manner complying with the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16 exempt discretionary grants and awards of equity securities are to be made, or (B) a committee or committees designated by the Board to administer the Plan, which committee shall be constituted to comply with the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16 exempt discretionary grants and awards of equity securities are to be made. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and substitute new members, fill vacancies (however caused), and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16 exempt discretionary grants and awards of equity securities are to be made.

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(iii) Administration With Respect to Other Persons. With respect to Option grants made to Employees who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a committee or committees designated by the Board, which committee shall be constituted to satisfy Applicable Laws. Once appointed, such Committee shall serve in its designated capacity until otherwise directed by the Board. The Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and substitute new members, fill vacancies (however caused), and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

(i) to grant options to Employees hereunder;

(ii) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(n) of the Plan;

(iii) to determine the Employees eligible to be granted Options hereunder;

(iv) to determine whether and to what extent Options are granted hereunder;

(v) to determine the number of shares of Common Stock to be covered by each Option granted hereunder;

(vi) to approve forms of agreement for use under the Plan;

(vii) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration, and any restriction or limitation regarding any Option or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

(viii) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;

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(ix) to prescribe, amend, and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;

(x) to modify or amend each Option (subject to Section 14(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;

(xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option previously granted by the Administrator; and

(xii) to make all other determinations deemed necessary or advisable for administering the Plan.

(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options.

5. Eligibility. Nonstatutory Stock Options may be granted to those Employees selected by the Administrator. Incentive Stock Options may be granted only to those Employees selected by the Administrator. If otherwise eligible, an Employee who has been granted an Option may be granted additional Options.

6. Limitations.

(a) Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted.

(b) Neither the Plan nor any Option shall confer upon an Optionee any right with respect to continuing the Optionee’s employment relationship with the Company, nor shall they interfere in any way with the Optionee’s right or the Company’s right to terminate such employment relationship at any time, with or without cause.

(c) The following limitations shall apply to grants of Options to Employees:

(i) No Employee shall be granted, in any fiscal year of the Company, Options to purchase more than 2,000,000 Shares.

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(ii) In connection with his or her initial employment, an Employee may be granted Options to purchase up to an additional 2,000,000 Shares which shall not count against the limit set forth in subsection (i) above.

(iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 12.

(d) Stock Option Exchange Program.

(i) In General. Certain Optionees will be permitted to make a one-time exchange (the “Option Exchange Program”) of certain Options for a lesser number of new Options (“Replacement Options”). Subject to part (iii) below, only Options having an exercise price that is at least 150% of the fair market value of the Company’s Common Stock as of May 23, 2003 will be eligible for the exchange (“Eligible Options”). The fair market value of the Company’s Common Stock is defined for purposes of the Option Exchange Program as the average closing price of the Company’s Common Stock over the twenty trading days preceding May 23, 2003 (the “FMV”). All Optionees except for (1) the Company’s six most highly compensated officers, (2) Employees hired after December 1, 2002, and (3) Employees located in countries where the Company decides, in its sole discretion, that it is not feasible or practical under local regulations to offer the Option Exchange Program are eligible to participate in the Option Exchange Program (collectively, “Eligible Optionees”). Subject to part (iii) below, Eligible Options that are tendered by Eligible Optionees will be exchanged for a lesser number of Replacement Options determined in accordance with the Option exchange ratios set forth below. The Replacement Options will be granted on a date determined by the Board of Directors that is at least six months and one day after the date on which the Eligible Options are surrendered.

(ii) Exchange Ratios. The number of Replacement Options granted according to the exchange ratios will be rounded down to the nearest whole share on a grant-by-grant basis. On May 23, 2003, the Administrator will select the Option exchange ratios from the table below based on the FMV as of May 23, 2003.

Potential Exchange Ratios for Possible FMVs Per Share of Our Common Stock

Tier	Exercise Price of Old Options	$7.00 per share	$9.50 per share	$12.00 per share	$14.50 per share	$17.00 per share
1	$48.00 or Higher	5.00	4.00	3.00	2.50	2.25
2	$40.00 - $47.99	3.50	3.00	2.50	2.25	1.75
3	$30.00 - $39.99	2.50	2.25	2.00	1.75	1.50
4	$26.00 - $29.99	2.25	2.00	1.50	1.50	1.25
5	Below $26.00*	2.00	1.75	1.50	1.50	1.25

* An Option will be eligible for the exchange only if its exercise price is at least 150% of the FMV of our Common Stock on May 23, 2003. Consequently, certain Options in this tier (“Below $26.00”) may not be eligible for the exchange.

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If the FMV calculated on May 23, 2003 falls between any two of the values listed across the top row of the table above, the Administrator will interpolate between these values to determine an appropriate exchange ratio, rounded to the nearest 0.25 share. If the FMV calculated on May 23, 2003 is below $7.00 per share or above $17.00 per share, the exchange ratios will be recalculated based on the Black-Scholes valuation model. If the FMV calculated on May 23, 2003 is above $25.00 per share, the Option Exchange Program will be cancelled.

(iii) Options Granted within Six-Months Prior to the Option Exchange Program. Once an Eligible Optionee elects to participate in the Option Exchange Program, he or she will be required to tender any Options granted within the six months preceding the commencement of the Option Exchange Program (“Six Months Prior Options”). Six Months Prior Options are eligible to be exchanged even if such Options have an exercise price that is less than 150% of the FMV of the Company’s Stock as of May 23, 2003.

(iv) Replacement Options. Subject to possible differences in certain international locations, the Replacement Options will have an exercise price equal to the Fair Market Value of the Company’s Common Stock on the date of the new grant. Except in certain countries outside the United States as determined by the Administrator in its sole discretion and except in the case of Six Months Prior Options, the Replacement Options will have a term of seven years and will vest over a thirty-month period with twenty percent vesting on the six-month anniversary of the grant date and the remainder vesting in equal amounts on a monthly basis. The Replacement Options for the Six Months Prior Options will have the same term and vesting schedule as the Options they are replacing. All other terms of the Replacement Options will be governed by the Plan.

(v) Foreign Jurisdictions. In order to facilitate participation in the Option Exchange Program by those Eligible Optionees who are employed by the Company outside the United States, the Administrator may provide for such modifications and additional terms and conditions to the Option Exchange Program as the Administrator may consider necessary or appropriate to accommodate differences in local law, policy or custom, or to facilitate administration of the program.

7. Term of Plan. Subject to Section 18 of the Plan, the Plan shall become effective upon its approval by the shareholders of the Company as described in Section 18 of the Plan. It shall continue in effect for a term of ten (10) years unless terminated earlier under Section 14 of the Plan.

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8. Term of Option. The term of each Option shall be stated in the Notice of Grant; provided, however, that in the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Notice of Grant.

9. Option Exercise Price and Consideration.

(a) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(b) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised. In so doing, the Administrator may specify that an Option may not be exercised until the completion of a service period.

(c) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of:

(i) cash;

(ii) check;

(iii) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;

(iv) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price;

(v) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee’s participation in any Company-sponsored deferred compensation program or arrangement;

(vi) any combination of the foregoing methods of payment; or

(vii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.

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10. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed exercised when the Company receives: (i) written notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 12 of the Plan.

Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(b) Termination of Employment Relationship.

(i) In General. Upon termination of an Optionee’s Continuous Status as an Employee, other than upon the Optionee’s death, Disability, or Retirement, the Optionee may exercise his or her Option within such period of time as is specified in the Notice of Grant to the extent that he or she is entitled to exercise it on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant). In the absence of a specified time in the Notice of Grant, the Option shall remain exercisable for thirty (30) days following the Optionee’s termination. In the case of an Incentive Stock Option, such period of time for exercise shall not exceed three (3) months from the date of termination. If, on the date of termination, the Optionee is not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(ii) Retirement of Optionee. In the event of termination of an Optionee’s Continuous Status as an Employee as a result of his or her Retirement, such Optionee’s Option shall, in the sole discretion of the Administrator, accelerate vesting or

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continue to vest, continue to become exercisable, and may be exercised during such period of time as is determined by the Administrator and as provided in the Option Agreement (but in no event may the Option be exercised after the expiration date of the term of such Option as set forth in the Option Agreement). If, at the end of such period of time, the Optionee is not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall revert to the Plan. If the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(iii) Disability of Optionee. Upon termination of an Optionee’s Continuous Status as an Employee as a result of the Optionee’s Disability, the Optionee may exercise his or her Option at any time within three (3) months (or such other period of time not exceeding twelve (12) months as is determined by the Administrator, with such determination in the case of an Incentive Stock Option being made at the time of grant of the Option) from the date of termination, but only to the extent that the Optionee is entitled to exercise it on the date of termination (and in no event later than the expiration of the term of the Option as set forth in the Notice of Grant). If, on the date of termination, the Optionee is not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(iv) Death of Optionee. Upon the death of an Optionee:

(a) during the term of the Option who is at the time of his or her death an Employee of the Company and who shall have been in Continuous Status as an Employee since the date of grant of the Option, the Option may be exercised by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance at any time within six (6) months (or, in the case of Retirement, such longer period of time, not to exceed 12 months, as determined by the Administrator) following the date of death, but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement, and only to the extent of the right to exercise the Option that would have accrued had the Optionee continued living and remained in Continuous Status as an Employee six (6) months after the date of death, subject to the limitation set forth in Section 6(a); or

(b) within thirty (30) days (or such other period of time not exceeding three (3) months as is determined by the Administrator, with such determination in the case of an Incentive Stock Option being made at the time of grant of the Option) after his or her termination of Continuous Status as an Employee, the Option may be exercised by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, at any time within six (6) months (or, in the case of Retirement, such longer period of time, not to exceed 12 months, as determined by the Administrator) following the date of death, but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement, and only to the extent of the right to exercise the Option that had accrued at the date of termination.

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(c) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.

(d) Rule 16b-3. Options granted to individuals subject to Section 16 of the Exchange Act (“Insiders”) must comply with the applicable provisions of Rule 16b-3 and shall contain such additional conditions or restrictions as may, in the Administrator’s sole discretion, be necessary and desirable to qualify thereunder for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.

(v) Election of Fixed Exercise Period for Portion of Option Granted on December 20, 2000

(a) In General. An Optionee who received an Option grant on December 20, 2000 (“December 2000 Grant”) may make an election requiring the Optionee to exercise that portion of the December 2000 Grant that vested between December 1, 2004 and January 1, 2005 (“Eligible Options”) in any calendar year after the calendar year in which the Optionee makes such an election, provided, however, that the calendar year selected is not after the expiration of the December 2000 Grant.

(b) Termination of Optionee. Should an Optionee terminate employment prior to the calendar year elected to exercise the Eligible Options, the Optionee’s election shall be automatically cancelled as of the effective date of Optionee’s termination and the post-termination exercise period specified in the Notice of Grant shall apply.

(c) Failure to Exercise in Elected Year. Should an Optionee fail to exercise the Eligible Options in the calendar year elected, the Eligible Options will automatically cancel on the final business day of the elected calendar year.

(d) Terms and Conditions of Election. In order for an election to become effective, the Optionee must provide the Company with an executed election, on a form approved by the Company, pursuant to the applicable procedures established by the Company. The Company reserves the right, in its sole and absolute discretion, to determine all questions as to the form of elections and the validity, eligibility, and time of receipt of any election. The Company’s determination of such matters will be final and binding on all parties.

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(e) Cancellation of Election Due to Change in Applicable Law. Notwithstanding any other provision of the Plan or any applicable valid election entered into by Optionee pursuant to this Section 10(b)(v), in the event that a change in applicable law results in the revocation of the unfavorable tax impacts required by Section 409A of the Code, then with respect to any Eligible Options, all elections made by Optionee under this Section 10(b)(v) shall be either automatically revoked to the extent authorized by such change in applicable law or, with the consent of the Optionee, amended to comply with such changes in applicable law. The determination of the impact of any changes in applicable law to this Section 10(b)(v), and the procedures to implement such changes, shall be made in the sole and absolute discretion of the Company.

11. Non-Transferability of Options. An Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.

12. Adjustments Upon Changes in Capitalization, Dissolution, Merger, or Asset Sale.

(a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination, or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding, and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable

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prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consummation of such proposed action.

(c) Merger or Asset Sale. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option, the Optionee shall have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which it would not otherwise be exercisable. If an Option is exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee that the Option shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger or sale of assets, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets was not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock subject to the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets.

13. Date of Grant. The date of grant of an Option shall be, for all purposes, the date on which the Administrator makes the determination granting such Option, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant.

14. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend, alter, suspend, or terminate the Plan.

(b) Shareholder Approval. The Company shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Rule 16b-3 or with

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Section 422 of the Code (or any successor rule or statute or other applicable law, rule, or regulation, including the requirements of any exchange or quotation system on which the Common Stock is listed or quoted). Such shareholder approval, if required, shall be obtained in such a manner and to such a degree as is required by the applicable law, rule, or regulation.

(c) Effect of Amendment or Termination. No amendment, alteration, suspension, or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company.

15. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws, and the requirements of any stock exchange or quotation system upon which the Shares may then be listed or quoted, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b) Investment Representations. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

16. Liability of Company.

(a) Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered by an Option exceeds, as of the date of grant, the number of Shares which may be issued under the Plan without additional shareholder approval, such Option shall be void with respect to such excess Optioned Stock, unless shareholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance with Section 14(b) of the Plan.

17. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

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18. Shareholder Approval. Continuance of the Plan shall be subject to approval by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted. Such shareholder approval shall be obtained in the manner and to the degree required under Applicable Laws and the rules of any stock exchange upon which the Common Stock is listed.

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EX-31.1

EXHIBIT 31.1

ALTERA CORPORATION

CERTIFICATION

I, John P. Daane, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Altera Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2007

/s/ John P. Daane

John P. Daane

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

ALTERA CORPORATION

CERTIFICATION

I, Timothy R. Morse, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Altera Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2007

/s/ Timothy R. Morse

Timothy R. Morse

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

ALTERA CORPORATION

CERTIFICATION

In connection with the periodic report of Altera Corporation (the “Company”) on Form 10-Q for the period ended June 29, 2007, as filed with the Securities and Exchange Commission (the “Report”), I, John P. Daane, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: August 6, 2007

/s/ John P. Daane

John P. Daane

Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Altera Corporation and will be retained by Altera Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

ALTERA CORPORATION

CERTIFICATION

In connection with the periodic report of Altera Corporation (the “Company”) on Form 10-Q for the period ended June 29, 2007, as filed with the Securities and Exchange Commission (the “Report”), I, Timothy R. Morse, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: August 6, 2007

/s/ Timothy R. Morse

Timothy R. Morse

Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Altera Corporation and will be retained by Altera Corporation and furnished to the Securities and Exchange Commission or its staff upon request.