Mentor Graphics Announces Revenues of $119.5M; Earnings-

Per-Share of $.09 Wilsonville, Ore., A (PROTEXT) - Mentor Graphics Corporation(Nasdaq: MENT) today announced second quarter revenues of $119.5million and earnings-per-share of $.09, before one-time charges.Mentor experienced continued strong growth in worldwide productbookings which were up almost 20%, and North American softwarebookings which were up about 40% from the quarter a year ago.Operating income before special charges nearly doubled from thesecond quarter of 1998 to $10.5 million. "While we are disappointed with our revenue, we took stepsthis quarter to strengthen our business with several key productannouncements," said Walden C. Rhines, president and CEO ofMentor Graphics. "Our Calibre physical verification productportfolio which continues to take market share, grew with theavailability of integrated optical and process correctionsoftware to improve the yields of customers' wafer fabs. We alsoshipped the second release of the industry's only integratedfield-programmable gate-array (FPGA) solution, Packaged Power.Lastly, we continue to build our leadership in design reuse withthe announcement of the QuickUse Development System and a multi-million dollar engagement from Toshiba for it." Earnings after charges were essentially break-even. One-timecharges were related to a business divestiture and litigationsettlement expenses. Revenue was affected by a re-alignment of the HDL division'sdistribution channels that occurred in the first quarter.Additionally, subscription-licensing contracts increasedsignificantly for the quarter. Subscription licensing recognizesrevenue over the life of the contract, which significantlyreduces recognizable revenue in a current quarter. "We see multi-hundred million dollar opportunities in two keymarkets, physical verification and FPGA software," said GregoryK. Hinckley, CFO and COO of Mentor Graphics. "Our Calibrephysical verification product revenue nearly doubled over thesecond quarter of 1998 in a market expected to be a couple ofhundred million dollars by 2002. Additionally, we are focusing ongrowing our HDL division's leadership in FPGA software, expectedto be a several hundred million dollar market by 2002." Mentor Graphics Corporation is a world leader in electronichardware and software design solutions, providing products andconsulting services for the world's largest electronics andsemiconductor companies. Established in 1981, the companyreported revenues over the last 12 months of over $500 millionand employs approximately 2,600 people worldwide. Companyheadquarters are located at 8005 S.W. Boeckman Road, Wilsonville,Oregon 97070-7777. World Wide Web site: http://www.mentor.com. NOTE: Calibre and Mentor Graphics are registered trademarks ofthe Mentor companies. Packaged Power and QuickUse are trademarksof the Mentor companies. All other company or product names arethe registered trademarks or trademarks of their respectiveowners. Certain statements contained in the press release constitute"forward-looking" statements within the meaning of Section 21E ofthe Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertaintiesand other factors that may cause the actual results, performanceor achievements of the Company or industry results to bematerially different from any results, performance orachievements expressed or implied by such forward-lookingstatements. Such factors include, among others, the following:(i) the Company's ability to successfully offer products andservices that compete in the highly competitive and dynamic EDAindustry including the risk that the company's technology,products or inventory become obsolete; (ii) effects of theincreasing volatility of foreign currency fluctuations on theCompany's business and operating results; (iii) the overallinstability of Asian or other economies, including changes inregional or worldwide economic or political conditions,government trade restrictions, limitations on repatriation ofearnings, licensing and intellectual property rights protection;(iv) the timing of completion of customer contracts and the termsof delivery of software, hardware and other services and (v) theCompany's ability to recruit and retain necessary personnel toresearch and develop, market, sell and service products. Giventhese uncertainties, prospective investors are cautioned not toplace undue reliance on such forward-looking statements. MentorGraphics disclaims any obligation to update any such factors orto publicly announce the results of any revisions to any of theforward-looking statements to reflect future events ordevelopments.

MENTOR GRAPHICS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Six MonthsEnded

June 30,

June 30,

1999

1998

1999

1998 Revenues: System and software

$66,670 $63,854 $139,410$122,060 Service and support

52,837

55,263 102,670105,065 Total revenues

119,507 119,117 242,080227,125 Cost of revenues: System and software

6,968

8,134

14,41414,390 Service and support

21,960

24,925

44,34249,472 Total cost of revenues

28,928

33,059

58,75663,862 Gross margin

90,579

86,058 183,324163,263 Operating expenses: Research and development

27,687

29,323

56,55657,728 Marketing and selling

41,465

40,301

83,78079,255 General and administration 10,890

10,781

23,78621,286 Special charges

5,256

4,532

21,83110,307 Total operating expenses

85,298

84,937 185,953168,576 Operating income (loss)

5,281

1,121 (2,629)(5,313) Other loss, net

(5,687)

(90) (8,508)(3,213)

Income (loss) before

income taxes

(406)

1,031 (11,137)(8,526) Income tax expense (benefit) (89)

227 (2,450)(1,876)

Net income (loss)

$(317)

$804 $(8,687)$(6,650) Net income (loss) per share:

Basic

$.00

$.01

$(.13)$(.10)

Diluted

$.00

$.01

$(.13)$(.10) Weighted average number of

shares outstanding:

Basic

66,355

65,009

66,22564,802

Diluted

66,355

65,817

66,22564,802

MENTOR GRAPHICS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

As of

As of

June 30, 1999

Dec 31,1998

(Unaudited) Assets Current assets: Cash and short-term investments

$116,956

$137,585 Trade accounts receivable, net

117,100

125,844 Other receivables

7,467

7,575 Prepaid expenses and other

12,955

23,503 Deferred income taxes

10,759

10,937

Total current assets

265,237

305,444 Property, plant and equipment, net

87,213

95,214 Term receivables, long-term

45,453

36,430 Other assets, net

25,892

27,035

Total assets

$423,795

$464,123 Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings

--

24,000 Accounts payable

6,826

10,101 Income taxes payable

17,183

20,408 Accrued payroll and related liabilities 27,646

41,958 Accrued liabilities

35,748

33,295 Deferred revenue

43,747

36,484

Total current liabilities

131,150

166,246 Other long-term deferrals

1,295

1,425

Total liabilities

132,445

167,671 Minority interest

1,286

1,170 Stockholders' equity: Common stock

308,350

303,352 Accumulated deficit

(30,933)

(22,246) Accumulated other comprehensive income 12,647

14,176

Total stockholders' equity

290,064

295,282

Total liabilities and stockholders' equity $423,79 $464,123CONTACT: Ryerson Schwark, Public and Investor Relations, 503-685-1462, or ry_schwark@mentor.com, or Dennis Weldon, Treasurer, 503-685-1462, or dennis_weldon@mentor.com, both of Mentor GraphicsCorporation ots Original Text Service: Mentor GraphicsCorporation Internet: http://www.newsaktuell.de Contact: RyersonSchwark, Public and Investor Relations, 503-685-1462, orry_schwark@mentor.com, or Dennis Weldon, Treasurer, 503-685-1462,or dennis_weldon@mentor.com, both of Mentor Graphics CorporationWeb site: http://www.mentor.com

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