8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

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

Date of report (Date of earliest event reported): February 1, 2006

CADENCE DESIGN SYSTEMS, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware
(State or Other Jurisdiction
of Incorporation) 000-15867
(Commission File Number) 77-0148231
(I.R.S. Employer
Identification No.)

2655 Seely Avenue, Building 5 San Jose, California	95134
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:   (408) 943-1234

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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

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

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

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

TABLE OF CONTENTS

EXHIBIT 99.1

Item 2.02. Results of Operations and Financial Condition.

     On February 1, 2006, Cadence Design Systems, Inc. issued a press release announcing its financial results for the fourth quarter and fiscal year ended December 31, 2005. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits.

     (c) Exhibits

Exhibit	Description
99.1	Press release issued by Cadence Design Systems, Inc. on February 1, 2006

SIGNATURES

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

Dated: February 1, 2006

CADENCE DESIGN SYSTEMS, INC.
By:	/s/ William Porter
	William Porter
	Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit	Description
99.1	Press Release issued by Cadence Design Systems, Inc. on February 1, 2006

EX-99.1

 EXHIBIT 99.1

For more information, please contact:

Investors and Shareholders
Jennifer Jordan
Cadence Design Systems, Inc.
408-944-7100
investor_relations@cadence.com

Media and Industry Analysts
Adolph Hunter
Cadence Design Systems, Inc.
408-914-6016
publicrelations@cadence.com

Cadence Reports Q4 Revenue Up 10% Over Q4 2004

     SAN JOSE, Calif.—Feb. 1, 2006—Cadence Design Systems, Inc. (NASDAQ: CDNS) today reported fourth quarter 2005 revenue of $378 million, an increase of 10 percent over the $343 million reported for the same period in 2004. On a GAAP basis, Cadence^® recognized net income of $27 million, or $0.08 per share, in the fourth quarter of 2005, compared to $60 million, or $0.20 per share, in the same period in 2004. Revenues for the fiscal year 2005 totaled $1.33 billion, an increase of 11 percent over 2004 total revenues of $1.20 billion. Net income for the fiscal year 2005 was $49 million, or $0.16 per share, compared to net income of $74 million, or $0.25 per share for the year 2004. Net income for both the fourth quarter and fiscal year 2005 includes incremental tax expense of $30 million, or $0.09 and $0.10 per share respectively for the fourth quarter and full year 2005, associated with the repatriation of foreign earnings.

     In addition to using GAAP results in evaluating Cadence’s business, management believes it is useful to measure results using a non-GAAP measure of net income, which excludes, as applicable, amortization of intangible assets and deferred compensation, in-process research and development charges, integration and other acquisition-related expenses, executive severance payments, restructuring charges and equity in losses (income) from investments. Non-GAAP net income is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company’s

Page 1 of 14

tax liability. See “GAAP to non-GAAP Reconciliation” below for further information on the non-GAAP measure.

     Using this non-GAAP measure, net income in the fourth quarter 2005 was $93 million, or $0.29 per share, on a diluted basis as compared to $80 million, or $0.26 per share, on a diluted basis in the same period in 2004. For the fiscal year 2005, non-GAAP net income was $258 million, or $0.83 per share, compared to $201 million and $0.66 per share in 2004.

     “We had a terrific fourth quarter and finished 2005 with good momentum. Our product portfolio is very competitive, our new initiatives such as kits and segmentation are starting to ramp, and our enterprise approach is winning with customers,” said Bill Porter, senior vice president and chief financial officer.

     “Throughout 2005 we delivered on our strategy to grow our core business through technology innovation, to expand into adjacencies such as verification and manufacturability, and to pursue pricing and business models for value,” said Mike Fister, president and CEO of Cadence Design Systems, Inc. “With our success this past year, we’ve laid the groundwork for growth and market expansion in 2006 and beyond.”

     The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially. These statements do not include the impact of any mergers, acquisitions or other business combinations completed after Dec. 31, 2005.

Business Outlook

     For the first quarter of 2006, the company expects total revenue in the range of $315 million to $325 million. First quarter GAAP earnings per diluted share are expected to be in the range of $0.07 to $0.09. Diluted earnings per share using the non-GAAP measure defined below are expected to be in the range of $0.19 to $0.21.

     For the full year 2006, the company expects total revenue in the range of $1.400 billion to $1.450 billion. On a GAAP basis, net income per diluted share for fiscal 2006 is expected in the

Page 2 of 14

range of $0.47 to $0.55. Using the non-GAAP measure defined below, diluted earnings per share for fiscal 2006 are expected to be in the range of $0.96 to $1.04.

     A schedule showing a reconciliation of the business outlook from GAAP net income and diluted net income per share to the non-GAAP net income and diluted net income per share is included with this release.

Audio Webcast Scheduled

     Fister and Porter will host a fourth quarter 2005 financial results audio webcast today, Feb. 1, 2006, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the Web site at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting Feb. 1, 2006, at 5 p.m. Pacific time and ending at 5 p.m. Pacific time on February 8, 2006. Webcast access is available at www.cadence.com/company/investor_relations.

About Cadence

     Cadence enables global electronic-design innovation and plays an essential role in the creation of today’s integrated circuits and electronics. Customers use Cadence software and hardware, methodologies, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. Cadence reported 2005 revenues of approximately $1.3 billion, and has approximately 5,000 employees. The company is headquartered in San Jose, Calif., with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about the company, its products, and services is available at www.cadence.com.

     Cadence and the Cadence logo are registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

     The statements contained above regarding the company’s fourth quarter 2005 results, those contained in the Business Outlook section above and the statements by Mike Fister and Bill Porter include forward-looking statements based on current expectations or beliefs, as well as a number of preliminary assumptions about future events that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Readers are cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to a number of uncertainties and other factors, many of which are outside Cadence’s control, including, among others: Cadence’s ability to compete successfully in the design automation product and the commercial electronic design and methodology services industries; the mix of products and services sold and the timing of significant orders for its products; economic uncertainty; fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; and the acquisition of other companies or the failure to successfully integrate those it acquires.

     For a detailed discussion of these and other cautionary statements, please refer to the company’s filings with the Securities and Exchange Commission. These include the company’s Annual Report on Form 10-K for the year ended Jan. 1, 2005, and the quarterly report on Form 10-Q for the quarter ended Oct. 1, 2005.

Page 3 of 14

GAAP to non-GAAP Reconciliation

     Cadence management evaluates and makes operating decisions using various operating measures. These measures are generally based on the revenues of its product, maintenance and services business operations and certain costs of those operations, such as cost of revenues, research and development, sales and marketing and general and administrative expenses. One such measure is non-GAAP net income (loss), which is a non-GAAP financial measure under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. This measure consists of GAAP net income (loss) excluding, as applicable, amortization of intangible assets and deferred compensation, in-process research and development charges, integration and other acquisition-related expenses, restructuring charges (severance and benefits, excess facilities and asset-related restructuring charges), executive severance payments and equity in losses (income) from investments. Intangible assets consist primarily of purchased technology, backlog, patents, trademarks, distribution rights, customer contracts and related relationships and non-compete agreements. Non-GAAP net income (loss) is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company’s tax liability.

     Management believes it is useful in measuring Cadence’s operations to exclude amortization of intangibles, deferred compensation, in-process research and development and acquisition-related expenses because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by management in the short term. Management believes that it also is useful to exclude restructuring costs. Cadence has dramatically reduced the size of its design services business and portions of its product and maintenance businesses over the past several years. As a result, in 2001, 2002 and 2003, Cadence’s GAAP statements of operations have included significant charges relating to such restructurings. Cadence believes that in measuring its operations it is useful to exclude such restructuring costs because the company’s level of restructuring activities is expected to significantly decrease in the foreseeable future. Management also believes it is useful to exclude the equity in losses (income) from investments and investment write-downs, as these items are not part of the company’s direct cost of operations. Rather, these are non-operating items that are included in other income (expense) and are part of the company’s investment activities.

     Management believes that non-GAAP net income (loss) provides useful supplemental information to management and investors regarding the performance of the company’s business operations and facilitates comparisons to our historical operating results. Management also uses this information internally for forecasting and budgeting. Non-GAAP financial measures should not be considered as a substitute for measures of financial performance prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results.

Page 4 of 14

     The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income for the periods shown below:

	Quarters Ended
Net Income Reconciliation	December 31, 2005		January 1, 2005
(in thousands)	(unaudited)
Net income on a GAAP basis	$	26,566	$	59,795
Amortization of acquired intangibles		21,012		24,750
Deferred compensation		9,906		9,312
Restructuring and other charges		549		4,142
Executive severance payments		—		1,548
Integration and acquisition-related costs		516		679
Equity in losses from investments, gain on Non-Qualified Deferred Compensation plan assets, venture capital partnership termination costs		1,450		3,203
Income tax related to repatriation of foreign earnings		30,082		—
Income tax effect of non-GAAP adjustments		2,939		(23,502	)
Net income on a non-GAAP basis	$	93,020	$	79,927

Page 5 of 14

	Years Ended
Net Income Reconciliation	December 31, 2005			January 1, 2005
(in thousands)	(unaudited)
Net income on a GAAP basis	$	49,343		$	74,474
Amortization of acquired intangibles		105,710			103,962
Deferred compensation		45,311			26,433
In-process research and development charges		9,400			9,000
Restructuring and other charges		35,334			13,542
Executive severance payments		7,582			1,548
Integration and acquisition-related costs		3,644			2,990
Equity in losses from investments, gain on Non-Qualified Deferred Compensation plan assets, venture capital partnership termination costs		13,434			27,409
Income tax related to repatriation of foreign earnings		30,082			—
Income tax effect of non-GAAP adjustments		(41,656	)		(58,580	)
Net income on a non-GAAP basis	$	258,184		$	200,778

Page 6 of 14

	Quarters Ended
Diluted Net Income per Share Reconciliation	December 31, 2005		January 1, 2005
(in thousands, except per share data)	(unaudited)
Diluted net income per share on a GAAP basis	$	0.08	$	0.20
Amortization of acquired intangibles		0.07		0.08
Deferred compensation		0.03		0.03
Restructuring and other charges		—		0.01
Executive severance payments		—		0.01
Integration and acquisition-related costs		—		—
Equity in losses from investments, gain on Non-Qualified Deferred Compensation plan assets, venture capital partnership termination costs		—		0.01
Income tax related to repatriation of foreign earnings		0.09		—
Income tax effect of non-GAAP adjustments		0.02		(0.08	)
Diluted net income per share on a non-GAAP basis	$	0.29	$	0.26
Shares used in calculation of diluted net income per share —GAAP		319,647		303,858
Shares used in calculation of diluted net income per share —non-GAAP (A)		319,647		303,858

Page 7 of 14

	Years Ended
Diluted Net Income per Share Reconciliation	December 31, 2005			January 1, 2005
(in thousands, except per share data)	(unaudited)
Diluted net income per share on a GAAP basis	$	0.16		$	0.25
Amortization of acquired intangibles		0.34			0.34
Deferred compensation		0.14			0.09
Restructuring and other charges		0.11			0.04
In-process research and development charges		0.03			0.03
Executive severance payments		0.02			0.01
Integration and acquisition-related costs		0.01			0.01
Equity in losses from investments, gain on Non-Qualified Deferred Compensation plan assets, venture capital partnership termination costs		0.04			0.08
Income tax related to repatriation of foreign earnings		0.10			—
Income tax effect of non-GAAP adjustments		(0.12	)		(0.19	)
Diluted net income per share on a non-GAAP basis	$	0.83		$	0.66
Shares used in calculation of diluted net income per share —GAAP		314,383			305,774
Shares used in calculation of diluted net income per share —non-GAAP (A)		314,383			305,774

(A) Shares used in the calculation of GAAP earnings per share are expected to be the same as shares used in the calculation of non-GAAP earnings per share except when the company reports a GAAP loss and non-GAAP income, or GAAP income and a non-GAAP loss.

Page 8 of 14

Investors are encouraged to look at GAAP results as the best measure of financial performance. For example, amortization of intangibles or amortization of deferred compensation or in-process technology are important to consider because they may represent initial expenditures that under GAAP are reported across future fiscal periods. Likewise, deferred compensation expense is an obligation of the company that should be considered. Restructuring charges can be triggered by acquisitions or product adjustments as well as overall company performance within a given business environment. All of these metrics are important to financial performance generally.

Though Cadence management finds its non-GAAP measure is useful in evaluating the performance of Cadence’s business, its reliance on this measure is limited because items excluded from such measures often have a material effect on Cadence’s earnings and earnings per share calculated in accordance with GAAP. Therefore, Cadence management typically uses its non-GAAP earnings and earnings per share measures, in conjunction with GAAP earnings and earnings per share measures, to address these limitations.

Cadence believes that presenting its non-GAAP measure of earnings and earnings per share provides investors with an additional tool for evaluating the performance of the company’s business, which management uses in its own evaluation of performance, and an additional base line for assessing the future earnings potential of the company. While the GAAP results are more complete, the company prefers to allow investors to have this supplemental measure since, with reconciliation to GAAP, it may provide additional insight into our financial results.

Cadence expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Cadence may reiterate the Business Outlook published in this press release. At the same time, Cadence will keep this press release, including the outlook, publicly available on its Web site.

Prior to the start of the Quiet Period (described below), the public may continue to rely on the Business Outlook contained herein as still being Cadence’s current expectations on matters covered unless Cadence publishes a notice stating otherwise.

Beginning Mar. 17, 2006, Cadence will observe a “Quiet Period” during which the Business Outlook as provided in this press release and the company’s most recent annual report on Form 10-K and quarterly report on Form 10-Q no longer constitute the company’s current expectations. During the Quiet Period, the Business Outlook in these documents should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to update by the company. During the Quiet Period, Cadence representatives will not comment on Cadence’s business outlook or its financial results or expectations. The Quiet Period will extend until the day when Cadence’s First Quarter 2006 Earnings Release is published, which is currently scheduled for Apr. 26, 2006.

# # #

Page 9 of 14

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
December 31, 2005 and January 1, 2005
(In thousands)
(Unaudited)

	December 31, 2005		January 1, 2005
Current Assets:
Cash and cash equivalents	$	861,315	$	448,517
Short-term investments		33,276		144,491
Receivables, net of allowance for doubtful accounts of $10,979 and $12,734, respectively		282,073		384,114
Inventories		28,902		20,481
Prepaid expenses and other		70,736		72,312
Total current assets		1,276,302		1,069,915
Property, plant and equipment, net of accumulated depreciation of $549,593 and $498,424, respectively		356,945		390,367
Goodwill		1,232,926		995,065
Acquired intangibles, net		153,847		195,655
Installment contract receivables		102,748		96,038
Other assets		278,544		242,799
Total Assets	$	3,401,312	$	2,989,839
Current Liabilities:
Accounts payable and accrued liabilities	$	300,586	$	277,992
Current portion of long-term debt		32,000		—
Current portion of deferred revenue		273,265		270,966
Total current liabilities		605,851		548,958
Long-term Liabilities:
Long-term portion of deferred revenue		51,864		20,847
Convertible notes		420,000		420,000
Long-term debt		128,000		—
Other long-term liabilities		350,893		300,064
Total long-term liabilities		950,757		740,911
Stockholders’ Equity		1,844,704		1,699,970
Total Liabilities and Stockholders’ Equity	$	3,401,312	$	2,989,839

Page 10 of 14

Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Quarters and Years Ended December 31, 2005 and January 1, 2005
(In thousands, except per share amounts)
(Unaudited)

	Quarters Ended						Years Ended
	December 31,			January 1,			December 31,			January 1,
	2005			2005			2005			2005
Revenue:
Product	$	257,684		$	226,730		$	851,496		$	729,783
Services		32,656			32,982			126,169			137,046
Maintenance		88,023			83,384			351,527			330,651
Total revenue		378,363			343,096			1,329,192			1,197,480
Costs and Expenses:
Cost of product		17,018			23,421			79,649			82,011
Cost of services		21,620			21,467			90,335			90,993
Cost of maintenance		14,870			13,236			58,796			53,049
Marketing and sales		95,497			87,806			356,043			325,937
Research and development		94,797			87,713			370,140			351,254
General and administrative		25,512			21,664			117,590			85,413
Amortization of acquired intangibles		8,562			11,028			47,762			55,700
Deferred compensation		9,906			9,312			45,311			26,433
Restructuring and other charges		549			4,142			35,334			13,542
Write-off of acquired in-process technology		—			—			9,400			9,000
Total costs and expenses		288,331			279,789			1,210,360			1,093,332
Income from operations		90,032			63,307			118,832			104,148
Interest expense		(1,503	)		(1,378	)		(5,446	)		(6,198	)
Other income (expense), net		3,741			2,447			15,097			(11,513	)
Income before provision for income taxes		92,270			64,376			128,483			86,437
Provision for income taxes		65,704			4,581			79,140			11,963
Net income	$	26,566		$	59,795		$	49,343		$	74,474
Basic net income per share	$	0.09		$	0.22		$	0.18		$	0.27
Diluted net income per share	$	0.08		$	0.20		$	0.16		$	0.25
Weighted average common shares outstanding — basic		281,628			270,734			278,520			271,328
Weighted average common shares outstanding — diluted		319,647			303,858			314,383			305,774

Page 11 of 14

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Years Ended December 31, 2005 and January 1, 2005
(In thousands)
(Unaudited)

	Years Ended
	December 31,			January 1,
	2005			2005
Cash and Cash Equivalents at Beginning of Period	$	448,517		$	309,175
Cash Flows from Operating Activities:
Net income		49,343			74,474
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		184,717			179,205
Deferred compensation		45,311			31,408
Equity in loss from investments, net		6,492			16,944
Gain on investments, net		(18,297	)		(12,467	)
Write-down of investment securities		10,934			4,236
Write-off of acquired in-process technology		9,400			9,000
Non-cash restructuring and other charges		2,239			4,142
Tax benefits from employee stock transactions		11,715			7,108
Tax benefit of call options		6,167			7,742
Deferred income taxes		(22,968	)		(15,695	)
Proceeds from the sale of receivables		192,079			30,070
Provisions (recoveries) for losses (gains) on trade accounts receivable and sales returns		(1,778	)		447
Other non-cash items		296			(431	)
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables		54,928			(49,361	)
Inventories		(7,588	)		(3,555	)
Prepaid expenses and other		(8,094	)		(3,410	)
Installment contract receivables		(155,648	)		20,556
Other assets		1,640			16,417
Accounts payable and accrued liabilities		20,330			2,001
Deferred revenue		32,616			34,878
Other long-term liabilities		12,449			18,813
Net cash provided by operating activities		426,283			372,522
Cash Flows from Investing Activities:
Proceeds from sale of available-for-sale securities		14,921			8,301
Proceeds from sale of short-term investments		289,225			516,935
Purchases of short-term investments		(180,975	)		(549,835	)
Proceeds from the sale of long-term investments		6,075			9,900
Proceeds from sale of property, plant and equipment		33,625			3,625
Purchases of property, plant and equipment		(71,656	)		(61,779	)
Purchases of software licenses		(2,600	)		(4,157	)
Investment in venture capital partnerships and equity investments		(14,184	)		(22,773	)
Cash paid in business combinations and asset acquisitions, net of cash acquired		(297,128	)		(115,170	)
Net cash used for investing activities		(222,697	)		(214,953	)
Cash Flows from Financing Activities:
Proceeds from term loan		160,000			—
Principal payments on capital leases		(62	)		(370	)
Payment of convertible notes issuance costs		—			(1,920	)
Proceeds from issuance of common stock		146,481			75,318
Purchases of treasury stock		(101,070	)		(94,105	)
Net cash provided by (used for) financing activities		205,349			(21,077	)
Effect of exchange rate changes on cash and cash equivalents		3,863			2,850
Increase in cash and cash equivalents		412,798			139,342
Cash and Cash Equivalents at End of Period	$	861,315		$	448,517

Page 12 of 14

Cadence Design Systems, Inc.
As of February 1, 2006
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)

	Quarter ended		Year ended
	April 1, 2006		December 30, 2006
	Forecast		Forecast
Diluted net income per share on a GAAP basis	$	0.07 to $0.09	$	0.47 to $0.55
Amortization of acquired intangibles		0.07		0.18
Stock-based compensation expense		0.08		0.31
Restructuring and other charges		—		0.01
Equity in losses from investments, gain on Non-Qualified Deferred Compensation plan assets		—		0.01
Income tax effect of non-GAAP adjustments		(0.03)		(0.02)
Diluted net income per share on a non-GAAP basis	$	0.19 to $0.21	$	0.96 to $1.04

Cadence Design Systems, Inc.
As of February 1, 2006
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)

	Quarter ended		Year ended
	April 1, 2006		December 30, 2006
($ in Millions)	Forecast		Forecast
Net income on a GAAP basis	$	20 to $26	$	150 to $174
Amortization of acquired intangibles		21		60
Stock-based compensation expense		25		100
Restructuring and other charges		1		2
Integration and acquisition-related costs		1		2
Equity in losses from investments, gain on Non-Qualified Deferred Compensation plan assets		1		4
Income tax effect of non-GAAP adjustments		(7)		(5)
Net income on a non-GAAP basis	$	62 to $68	$	313 to $337

Page 13 of 14

Cadence Design Systems, Inc.
(Unaudited)

Revenue Mix by Geography (% of Total Revenue)

	2003															2004															2005
GEOGRAPHY	Q1			Q2			Q3			Q4			Year			Q1			Q2			Q3			Q4			Year			Q1			Q2			Q3			Q4			Year
North America		55	%		54	%		59	%		64	%		58	%		53	%		57	%		55	%		45	%		52	%		46	%		49	%		53	%		42	%		48	%
Europe		17	%		15	%		19	%		16	%		17	%		16	%		19	%		21	%		30	%		22	%		16	%		17	%		21	%		20	%		18	%
Japan		20	%		22	%		13	%		13	%		17	%		22	%		14	%		15	%		14	%		16	%		30	%		25	%		20	%		26	%		25	%
Asia		8	%		9	%		9	%		7	%		8	%		9	%		10	%		9	%		11	%		10	%		8	%		9	%		6	%		12	%		9	%
Total		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%

Revenue Mix by Product Group (% of Total Revenue)

	2003															2004															2005
PRODUCT GROUP	Q1			Q2			Q3			Q4			Year			Q1			Q2			Q3			Q4			Year			Q1			Q2			Q3			Q4			Year
Functional Verification		20	%		18	%		18	%		20	%		19	%		20	%		20	%		18	%		19	%		19	%		20	%		19	%		21	%		25	%		21	%
Digital IC Design		24	%		22	%		27	%		20	%		23	%		25	%		21	%		24	%		27	%		24	%		27	%		23	%		26	%		29	%		28	%
Custom IC Design		27	%		28	%		27	%		27	%		27	%		27	%		24	%		27	%		27	%		27	%		23	%		31	%		27	%		22	%		25	%
Design for Manufacturing		9	%		10	%		7	%		13	%		10	%		6	%		9	%		12	%		8	%		9	%		9	%		9	%		9	%		8	%		9	%
System Interconnect		8	%		9	%		8	%		10	%		9	%		10	%		9	%		8	%		9	%		9	%		10	%		9	%		8	%		7	%		8	%
Services & Other		12	%		13	%		13	%		10	%		12	%		12	%		17	%		11	%		10	%		12	%		11	%		9	%		9	%		9	%		9	%
Total		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%

Note: Product Group total revenue includes Product + Maintenance

Page 14 of 14