As disclosed in its Form 12b-25, Cadence expects to report third quarter2008 revenue of approximately $235 million to $245 million, compared torevenue of $400.9 million reported for the same period in 2007. Cadenceexpects to recognize a GAAP net loss of approximately ($0.67) to ($0.65)per share on a diluted basis in the third quarter of 2008, compared to aGAAP net income of $0.24 per share on a diluted basis in the same period in2007. The anticipated GAAP net loss per share on a diluted basis isgreater than Cadence previously estimated principally because theanticipated number now takes into account the third quarter restructuringcharges for Cadence's recently announced restructuring and an increasedprovision for income tax based on Cadence's repatriation of previouslyuntaxed earnings from foreign subsidiaries. The anticipated results forthe third quarter of 2008 on both a GAAP and non-GAAP basis as reported inthis release do not include the impact of any changes to Cadence'sfinancial statements that may arise from the previously announcedinvestigation being conducted by the audit committee.

Cadence expects net loss per diluted share using the non-GAAP measuredefined below to be in the range of $(0.09) to $(0.07) for the thirdquarter of 2008. In addition to using GAAP results in evaluating Cadence'sbusiness, management believes it is useful to measure results using anon-GAAP measure of net income or net loss, which excludes, as applicable,amortization of intangible assets, stock-based compensation expense,in-process research and development charges, certain termination and legalcosts, costs related to Cadence's withdrawn proposal to acquire MentorGraphics Corporation and losses on the sale of Mentor Graphics Corporationshares, integration and acquisition-related costs, gains or losses andexpenses or credits related to non-qualified deferred compensation planassets, executive severance payments, restructuring charges and credits,losses on extinguishment of debt, equity in losses (income) frominvestments and write-down of investments. Non-GAAP net income or net lossis adjusted by the amount of additional taxes or tax benefit that thecompany would accrue if it used non-GAAP results instead of GAAP results tocalculate the company's tax liability. Investors and potential investorsare encouraged to review the reconciliation of non-GAAP financial resultswith their most direct comparable GAAP financial results below.

About Cadence

Cadence enables global electronic-design innovation and plays an essentialrole in the creation of today's integrated circuits and electronics.Customers use Cadence® software and hardware, methodologies, and servicesto design and verify advanced semiconductors, consumer electronics,networking and telecommunications equipment, and computer systems. Thecompany is headquartered in San Jose, Calif., with sales offices, designcenters, and research facilities around the world to serve the globalelectronics industry. More information about Cadence and its products andservices is available at www.cadence.com.

Cadence is a registered trademark and the Cadence logo is a trademark ofCadence Design Systems, Inc. All other trademarks are the property of theirrespective owners.

The statements contained in this filing regarding the timing of the filingof the Form 10-Q, the expected financial results of the third quarter 2008,and the previously announced investigation include forward-lookingstatements based on current expectations or beliefs, as well as a number ofpreliminary assumptions about future events that are subject to factors anduncertainties that could cause actual results to differ materially fromthose described in the forward-looking statements. Readers are cautionednot to put undue reliance on these forward-looking statements, which arenot a guarantee of future performance and are subject to a number of risks,uncertainties and other factors, many of which are outside Cadence'scontrol including but not limited to: (i) Cadence's ability to competesuccessfully in the electronic design automation product and the commercialelectronic design and methodology services industries; (ii) Cadence'sability to successfully complete and realize the expected benefits of thepreviously announced restructuring without significant unexpected costs ordelays; (iii) the mix of products and services sold and the timing ofsignificant orders for its products, and its shift to a ratable licensestructure may result in changes in the mix of license types; (iv) change incustomer demands, including the possibility that Cadence's previouslyannounced restructuring and management changes could result in delays incustomers' purchases of products and services; (v) economic and industryconditions in regions in which Cadence does business; (vi) fluctuations inrates of exchange between the U.S. dollar and the currencies of othercountries in which Cadence does business; (vii) capital expenditurerequirements, legislative or regulatory requirements, interest rates andCadence's ability to access capital and debt markets; (viii) theacquisition of other companies or technologies or the failure tosuccessfully integrate and operate these companies or technologies Cadenceacquires; (ix) the effects of the previously announced restructuring andmanagement changes on Cadence's business, including its strategic andcustomer relationships, ability to retain key employees and stock prices;(x) the outcome of the previously announced investigation being conductedby the audit committee; (xi) the effects of any litigation or otherproceedings to which Cadence is or may become a party; and (xii) the effectof any goodwill impairment analyses Cadence may perform in the future.

For a detailed discussion of these and other cautionary statements, pleaserefer to the company's filings with the Securities and Exchange Commission,including the company's Annual Report on Form 10-K for the year endedDecember 29, 2007 and the risk factors section of the company's QuarterlyReport on Form 10-Q for the period June 28, 2008.

GAAP to non-GAAP Reconciliation

Cadence management evaluates and makes operating decisions using variousoperating measures. These measures are generally based on the revenues ofits product, maintenance and services business operations and certain costsof those operations, such as cost of revenues, research and development,sales and marketing and general and administrative expenses. One suchmeasure is non-GAAP net income or net loss, which is a non-GAAP financialmeasure under Section 101 of Regulation G under the Securities Exchange Actof 1934, as amended, and is GAAP net income or net loss excluding, asapplicable, amortization of intangible assets, stock-based compensationexpense, in-process research and development charges, certain terminationand legal costs, costs related to Cadence's withdrawn proposal to acquireMentor Graphics Corporation and losses on the sale of Mentor GraphicsCorporation shares, integration and acquisition-related costs, gains orlosses and expenses or credits related to non-qualified deferredcompensation plan assets, executive severance payments, restructuringcharges and credits, losses on extinguishment of debt, equity in losses(income) from investments and write-down of investments. Intangible assetsconsist primarily of purchased or licensed technology, backlog, patents,trademarks, distribution rights, customer contracts and relatedrelationships and non-compete agreements. Non-GAAP net income or net lossis adjusted by the amount of additional taxes or tax benefit that thecompany would accrue if it used non-GAAP results instead of GAAP results tocalculate the company's tax liability.

Cadence's management believes it is useful in measuring Cadence'soperations to exclude amortization of intangible assets, in-processresearch and development charges and integration and acquisition-relatedcosts because these costs are primarily fixed at the time of an acquisitionand generally cannot be changed by Cadence's management in the short term.In addition, Cadence's management believes it is useful to excludestock-based compensation expense because it enhances investors' ability toreview Cadence's business from the same perspective as Cadence'smanagement, which believes that stock-based compensation expense is notdirectly attributable to the underlying performance of the company'sbusiness operations. Cadence's management also believes that it is usefulto exclude restructuring charges and credits. During the fourth quarter of2008, Cadence commenced a restructuring program that it expects to completein the second half of fiscal 2009. Cadence's management believes that inmeasuring the company's operations, it is useful to exclude any suchrestructuring charges and credits because Cadence does not undertakesignificant restructuring on a regular basis, and exclusion of such chargespermits more consistent evaluations of Cadence's performance before andafter such actions are taken. Cadence's management also believes it isuseful to exclude executive severance costs and certain termination andlegal costs as these costs do not occur frequently. Cadence's managementbelieves it is useful to exclude gains or losses and expenses or creditsrelated to the non-qualified deferred compensation plan assets as thesegains and expenses are not part of Cadence's direct costs of operations,but reflect changes in the value of assets held in the non-qualifieddeferred compensation plan. Finally, Cadence's management believes it isuseful to exclude the equity in losses (income) from investments andwrite-down of investments, as these items are not part of Cadence's directcost of operations. Rather, these are non-operating items that are includedin other income (expense) and are part of the company's investmentactivities.

In the third quarter of 2008, Cadence's estimated non-GAAP net loss alsoexcludes the impact of tax expense associated with Cadence's repatriationof foreign earnings. Cadence's management believes it is useful to excludethe tax expense associated with the repatriation of foreign earnings as itresulted from an event which is not expected to occur frequently.

In the third quarter of 2008, Cadence's estimated non-GAAP net loss alsoexcludes costs related to Cadence's proposal to acquire Mentor GraphicsCorporation and losses on the sale of Mentor Graphics Corporation sharesCadence acquired as part of the proposed acquisition. Cadence's managementbelieves that in measuring Cadence's operations it is useful to exclude thecosts and the losses associated with this proposed acquisition as theseitems are not directly related to Cadence's operating performance andresulted from events which are not expected to occur frequently.

Cadence's management believes that non-GAAP net income or net loss providesuseful supplemental information to Cadence's management and investorsregarding the performance of the company's business operations andfacilitates comparisons to the company's historical operating results.Cadence's management also uses this information internally for forecastingand budgeting. Non-GAAP financial measures should not be considered as asubstitute for or superior to measures of financial performance prepared inaccordance with GAAP. Investors and potential investors are encouraged toreview the reconciliation of non-GAAP financial measures contained withinthis press release with their most directly comparable GAAP financialresults.

The following tables reconcile the specific items excluded from estimatedGAAP net loss and estimated GAAP net loss per fully diluted share in thecalculation of estimated non-GAAP net loss and estimated non-GAAP net lossper fully diluted share for the periods shown below:

Estimated Diluted Net Loss per Share Reconciliation Quarter Ended September 27, 2008 ------------------- Estimated ------------------- (unaudited)Diluted net loss per share on a GAAP basis $ (0.67) to $ (0.65) Amortization of acquired intangibles 0.04 Stock-based compensation expense 0.06 Costs related to Cadence's withdrawn proposal to acquire Mentor Graphics Corporation 0.01 Restructuring and other charges 0.19 Equity in losses from investments, write-down of investments, gains and losses on non-qualified deferred compensation plan assets 0.01 Loss on sale of Mentor Graphics Corporation shares 0.04 Income tax related to repatriation of foreign earnings 0.28 Income tax effect of non-GAAP adjustments (0.05) -------------------Diluted net loss per share on a non-GAAP basis $ (0.09) to $ (0.07) ===================Estimated Net Loss Reconciliation Quarter Ended ($ in millions) September 27, 2008 ------------------- Estimated ------------------- (unaudited)Net loss on a GAAP basis $ (170) to $ (164) Amortization of acquired intangibles 11 Stock-based compensation expense 15 Costs related to Cadence's withdrawn proposal to acquire Mentor Graphics Corporation 3 Restructuring and other charges 48 Equity in losses from investments, write-down of investments, gains and losses on non-qualified deferred compensation plan assets 3 Loss on sale of Mentor Graphics Corporation shares 9 Income tax related to repatriation of foreign earnings 71 Income tax effect of non-GAAP adjustments (13) -------------------Net loss on a Non-GAAP basis $ (23) to $ (17) ===================

Investors are encouraged to look at the GAAP projections and results as thebest measure of financial performance. For example, amortization ofintangibles or in-process technology are important to consider because theymay represent initial expenditures that under GAAP are reported acrossfuture fiscal periods. Likewise, stock-based compensation expense is anobligation of the company that should be considered. Restructuring chargescan be triggered by acquisitions or product adjustments, as well as overallcompany performance within a given business environment. Losses onextinguishment of debt can be incurred on remaining convertible notes. Allof these metrics are important to financial performance generally.

Although Cadence's management finds GAAP measures useful in evaluating theperformance of Cadence's business, reliance on this measure is limitedbecause items excluded from such measures often have a material effect onCadence's earnings and earnings per share calculated in accordance withGAAP. Therefore, Cadence's management typically uses the non-GAAP earningsand earnings per share measures in conjunction with the GAAP earnings andearnings per share measures to address these limitations.

Cadence's management believes that presenting the non-GAAP measure ofearnings and earnings per share provides investors with an additional toolfor evaluating the performance of the company's business, which Cadence'smanagement uses in its own evaluation of performance, and an additionalbaseline for assessing the future earnings potential of the company. Whilethe GAAP results are more complete, Cadence's management prefers to allowinvestors to have this supplemental measure since it may provide additionalinsights into the company's financial results.

For more information, please contact:Investors and ShareholdersJennifer JordanCadence Design Systems, Inc.408-944-7100investor_relations@cadence.comMedia and Industry AnalystsAdolph HunterCadence Design Systems, Inc.408-914-6016publicrelations@cadence.com