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SAN JOSE, Calif.-Feb. 3, 2005-Cadence Design Systems, Inc. (NYSE: CDN) (Nasdaq: CDN) today reported strong results for the fourth quarter and the full year 2004. Fourth quarter revenues were $343 million, compared to $311 million for the same period last year.  Full year revenues totaled $1.20 billion, an increase of 7 percent over 2003 total revenues of $1.12 billion. On a GAAP basis, Cadence recognized net income of $60 million, or $0.20 per share, in the fourth quarter of 2004, compared to net income of $15 million, or $0.05 per share, in the same period last year. On a full year basis, Cadence net income for 2004 was $74 million, or $0.25 per share, compared to a net loss of $18 million and a diluted net loss per share of ($0.07) for the year 2003.

In addition to using GAAP results in evaluating Cadence's business, management also believes it is useful to measure results using a non-GAAP measure of net income (loss), which excludes, as applicable, amortization of intangible assets and deferred stock compensation, in-process research and development charges, integration and other acquisition-related expenses, restructuring charges and equity in losses (income) from investments. 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. See "GAAP to non-GAAP Reconciliation" below for further information on our non-GAAP measure. Using this non-GAAP measure, net income in the fourth quarter 2004 was $80 million, or $0.26 per share, on a fully diluted basis as compared to $65 million, or $0.22 per share, on a fully diluted basis, in the same period last year. On a full year basis, non-GAAP net income for 2004 was $201 million, or $0.66 per share, compared to $140 million and $0.50 per share in 2003.

"Cadence continued its consistent execution, in a challenging marketplace," said Mike Fister, Cadence president and CEO. "Strong demand for wireless, consumer electronics and high-performance computing plays to our specific strengths in analog mixed-signal and low-power digital design."


Business Highlights of 2004

Cadence® SoC Encounter(tm) helped customers like ATI, Fujitsu and Toshiba, among others, design some of the largest, most aggressive digital chips currently in production.  Toshiba taped out a 90-nanometer, 24-million-gate chip and adopted Encounter as its standard digital design flow.
During 2004, 58 new customers adopted Encounter RTL Compiler, Cadence's digital global synthesis product.   Well over 400 customers around the world now verify their leading-edge designs with Encounter Conformal®, Cadence's digital formal verification product.
Customers are leveraging Cadence's end-to-end platform strengths in analog, digital and RF to meet their needs in the growing wireless market. Customer productivity improved five to 10 times in analog circuit optimization as a result of Cadence's integration of the NeoLinear technology into the Virtuoso® custom design platform.
To meet the growing demand for concurrent hardware/software development, in Q4 Cadence introduced Palladium II, its most advanced emulator.  Palladium II achieves an industry first by reaching 256-million-gate capacity at the same time as providing increased throughput.
"This quarter's performance culminates a strong year for Cadence," Fister said. "Due to time-to-market pressures and the increased complexity of semiconductors, customers are increasingly turning to Cadence for an integrated, end-to-end solution across all design domains."
Added Bill Porter, senior vice president and Chief Financial Officer: "I'm proud of our strong balance sheet and especially pleased with our cash generation, highlighted by $371 million in operating cash flow for 2004."
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 that may be completed after February 3, 2005, other than Verisity, Ltd.


Business Outlook

For the first quarter of 2005, the company expects total revenue in the range of $280 million to $290 million. First quarter GAAP earnings per fully diluted share are expected to be in the range of $0.01 to $0.03. Diluted earnings per share using our non-GAAP measure defined below are expected to be in the range of $0.13 to $0.15.

For the full year 2005, the company expects total revenue in the range of $1.24 billion to $1.30 billion. On a GAAP basis, we expect net income per fully diluted share for fiscal 2005 in the range of $0.23 to $0.31. Using our non-GAAP measure defined below, we expect fully diluted earnings per share for fiscal 2005 to be in the range of $0.73 to $0.81.

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


Audio Webcast Scheduled

Cadence Design Systems, Inc.'s Ray Bingham, executive chairman of the board, Mike Fister, president and chief executive officer, and Bill Porter, chief financial officer, will host a fourth quarter and full year 2004 Financial Results audio webcast today, Feb. 3, 2005, 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. 3, 2005 at 5 p.m. Pacific time and ending at 5 p.m. Pacific time on Feb. 10, 2005.  Webcast access is available at www.cadence.com/company/investor_relations.


About Cadence

Cadence is the world's largest supplier of electronic design technologies and engineering services.  Cadence products and services are used to accelerate and manage the design of semiconductors, computer systems, networking equipment, telecommunications equipment, consumer electronics, and other electronics 
based products. With approximately 4,900 employees and 2004 revenues of approximately $1.2 billion, Cadence has sales offices, design centers, and research facilities around the world. The company is headquartered in San Jose, Calif., and trades on both the New York Stock Exchange and Nasdaq under the symbol CDN. More information is available at www.cadence.com.



 Cadence, the Cadence logo, Virtuoso, Conformal and Palladium are registered trademarks, and Encounter is a trademark 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 2004 results and results for the full year 2004, 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 January 3, 2004 and Quarterly Report on Form 10-Q for the quarter ended October 2, 2004.