<SUBMISSION>
<ACCESSION-NUMBER>0001095811-01-504249
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>8
<PERIOD>20010630
<FILING-DATE>20010814
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>CADENCE DESIGN SYSTEMS INC
<CIK>0000813672
<ASSIGNED-SIC>7372
<IRS-NUMBER>770148231
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0102
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-10606
<FILM-NUMBER>1711171
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>2655 SEELY ROAD BLDG 5
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
<PHONE>4089431234
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>555 RIVER OAKS PARKWAY
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>ECAD INC /DE/
<DATE-CHANGED>19880609
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>f74874e10-q.htm
<DESCRIPTION>FORM 10-Q PERIOD ENDED JUNE 30, 2001
<TEXT>
<HTML>
<HEAD>
<TITLE>Cadence Design Systems, Inc. Form 10-Q 6/30/2001</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="5">UNITED STATES</FONT></B>

<DIV align="center">
<B><FONT size="5">SECURITIES AND EXCHANGE COMMISSION</FONT></B>
</DIV>

<DIV align="center">
<B>Washington, D.C. 20549</B>
</DIV>

<P align="center">
<HR size="1" width="41%" align="center" noshade>

<P align="center">
<B><FONT size="5">FORM 10-Q</FONT></B>

<P align="left">
(Mark One)

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="2%"></TD>
        <TD width="3%"></TD>
        <TD width="95%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD><FONT face="wingdings">&#120;</FONT>&nbsp;&nbsp;&nbsp;</TD>
        <TD align="left">
        <B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

</TABLE>

<P align="center">
<B>For the quarterly period ended June&nbsp;30, 2001</B>

<P align="center">
<B>OR</B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="2%"></TD>
        <TD width="3%"></TD>
        <TD width="95%"></TD>
</TR>

<TR valign="top">
        <TD>&nbsp;</TD>
        <TD><FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;</TD>
        <TD align="left">
        <B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>

</TABLE>

<P align="center">
<B>For the transition period
from&nbsp;__________&nbsp;to&nbsp;__________</B>

<P align="center">
<B>Commission file number 1-10606</B>

<P align="center">
<HR size="1" width="41%" align="center" noshade>

<P align="center">
<B><FONT size="4">CADENCE DESIGN SYSTEMS, INC.</FONT></B>

<DIV align="center">
(Exact name of Registrant as Specified in Its Charter)
</DIV>

<P align="center">
<HR size="1" width="41%" align="center" noshade>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="center" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <B><FONT size="2">Delaware<BR>
        </FONT></B><FONT size="2">(State or Other Jurisdiction of<BR>
        Incorporation or Organization)
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" valign="top">
        <B><FONT size="2">77-0148231<BR>
        </FONT></B><FONT size="2">(I.R.S. Employer<BR>
        Identification No.)
        </FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
        <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
        <TD align="center" valign="top">
        <DIV style="margin-left:10px; text-indent:-10px">
        <B><FONT size="2">2655 Seely Avenue, Building 5, San Jose,
        California<BR>
        </FONT></B><FONT size="2">(Address of Principal Executive
        Offices)
        </FONT></DIV>
        </TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" valign="top">
        <B><FONT size="2">95134<BR>
        </FONT></B><FONT size="2">(Zip Code)
        </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<B>(408)&nbsp;943-1234</B>

<DIV align="center">
Registrant&#146;s Telephone Number, including Area Code
</DIV>

<P align="center">
<HR size="1" width="41%" align="center" noshade>

<P align="left">
Indicate by check mark whether the registrant (1)&nbsp;has filed
all reports required to be filed by Section&nbsp;13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12&nbsp;months (or for such shorter period that the registrant
was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past
90&nbsp;days.&nbsp;&nbsp;&nbsp;Yes&nbsp;
<FONT face="wingdings">&#120;</FONT>&nbsp;&nbsp;&nbsp;No&nbsp;
<FONT face="wingdings">&#111;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At August&nbsp;4, 2001, there were 248,519,432 shares of the
registrant&#146;s common stock, $0.01 par value, outstanding.
<!-- PAGEBREAK -->
<P><HR noshade><P>

<!-- TOC -->
<A name="toc"><DIV align="CENTER"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">INDEX</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">PART I. FINANCIAL INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">Item 1. Financial Statements</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#003">CONDENSED CONSOLIDATED BALANCE SHEETS</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#004">CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#005">CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#006">NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">Item 2.Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">Item 3.Quantitative and Qualitative Disclosures About Market Risk</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">PART II. OTHER INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">Item 1.Legal Proceedings</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">Item 2. Changes in Securities and Use of Proceeds</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">Item 3. Defaults Upon Senior Securities</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">Item 4. Submission of Matters to a Vote of Security Holders</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">Item 5. Other Information</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#015">Item 6. Exhibits and Reports on Form 8-K</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="f74874ex2-17.txt">EXHIBIT 2.17</A></TD></TR>
<TR><TD colspan="9"><A HREF="f74874ex2-18.txt">EXHIBIT 2.18</A></TD></TR>
<TR><TD colspan="9"><A HREF="f74874ex10-50.txt">EXHIBIT 10.50</A></TD></TR>
<TR><TD colspan="9"><A HREF="f74874ex10-51.txt">EXHIBIT 10.51</A></TD></TR>
<TR><TD colspan="9"><A HREF="f74874ex10-56.txt">EXHIBIT 10.56</A></TD></TR>
<TR><TD colspan="9"><A HREF="f74874ex10-57.txt">EXHIBIT 10.57</A></TD></TR>
<TR><TD colspan="9"><A HREF="f74874ex10-58.txt">EXHIBIT 10.58</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>CADENCE DESIGN SYSTEMS, INC.</B>

<!-- link1 "INDEX" -->
<DIV align="left"><A NAME="000"></A></DIV>

<DIV align="center">
<B>INDEX</B>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">PART I.</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<B><FONT size="2">FINANCIAL INFORMATION</FONT></B></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Item&nbsp; 1.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Financial Statements:
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Condensed Consolidated Balance Sheets:
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">&nbsp;&nbsp; June&nbsp;30, 2001 and
	December&nbsp;30, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Condensed Consolidated Statements of Operations:
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">&nbsp;&nbsp; Three and Six Months Ended
	June&nbsp;30, 2001 and July&nbsp;1, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Condensed Consolidated Statements of Cash Flows:
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">&nbsp;&nbsp; Six Months Ended June&nbsp;30, 2001
	and July&nbsp;1, 2000
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Notes to Condensed Consolidated Financial
	Statements
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Item&nbsp; 2.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Management&#146;s Discussion and Analysis of
	Financial Condition and
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">&nbsp;&nbsp; Results of Operations
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Item&nbsp; 3.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Quantitative and Qualitative Disclosures About
	Market Risk
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="8"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><FONT size="2">PART II.</FONT></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<B><FONT size="2">OTHER INFORMATION</FONT></B></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Item&nbsp; 1.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Legal Proceedings
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">43</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Item&nbsp; 2.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Changes in Securities and Use of Proceeds
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Item&nbsp; 3.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Defaults Upon Senior Securities
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Item&nbsp; 4.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Submission of Matters to a Vote of Security
	Holders
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Item&nbsp; 5.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Other Information
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Item&nbsp; 6.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Exhibits and Reports on Form&nbsp;8-K
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4" align="left" valign="top">
	<FONT size="2">Signatures
	</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">48</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "PART I. FINANCIAL INFORMATION" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="left">
<B>PART I.&nbsp; FINANCIAL INFORMATION</B>

<!-- link2 "Item 1. Financial Statements" -->
<DIV align="left"><A NAME="002"></A></DIV>

<DIV align="left">
<B>Item&nbsp;1.&nbsp; Financial Statements</B>
</DIV>

<P align="center">
<B>CADENCE DESIGN SYSTEMS, INC.</B>

<!-- link3 "CONDENSED CONSOLIDATED BALANCE SHEETS" -->
<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="center">
<B>CONDENSED CONSOLIDATED BALANCE SHEETS</B>
</DIV>

<DIV align="center">
<B>(In thousands)</B>
</DIV>

<P align="center">
<B>ASSETS</B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;30,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Current Assets:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and cash equivalents
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">130,037</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">85,220</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Short-term investments
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,026</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,749</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Receivables, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">249,077</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">289,468</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Inventories, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,138</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,149</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Prepaid expenses and other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">126,133</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">110,262</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total current assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">538,411</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">556,848</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Property, plant, and equipment, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">381,859</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">368,879</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Software development costs, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,338</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,738</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Acquired intangibles, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">355,508</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">326,518</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Installment contract receivables
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33,650</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38,420</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">159,306</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">175,918</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,480,072</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,477,321</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="11" align="center" valign="top">
	<B><FONT size="2">LIABILITIES AND STOCKHOLDERS&#146;
	EQUITY</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Current Liabilities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Notes payable and current portion of capital
	leases
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,807</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,212</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Accounts payable and accrued liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">243,826</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">273,594</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">233,068</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">215,768</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total current liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">478,701</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">491,574</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Long-term Liabilities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Capital leases
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,207</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,298</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Minority interest
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,878</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,612</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other long-term liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,044</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">61,372</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total long-term liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">69,129</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">76,282</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Stockholders&#146; Equity:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Common stock and capital in excess of par value
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">798,745</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">847,099</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Treasury stock at cost
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(164,151</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(256,260</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred compensation
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(53,506</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(60,978</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Retained earnings
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">369,157</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">394,224</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Accumulated other comprehensive loss
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(18,003</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(14,620</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total stockholders&#146; equity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">932,242</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">909,465</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,480,072</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,477,321</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
The accompanying notes are an integral part of these condensed
consolidated financial statements.

<P align="center"><FONT size="2">3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>CADENCE DESIGN SYSTEMS, INC.</B>

<!-- link3 "CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS" -->
<DIV align="left"><A NAME="004"></A></DIV>

<DIV align="center">
<B>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</B>
</DIV>

<DIV align="center">
<B>(In thousands, except per share amounts)</B>
</DIV>

<DIV align="center">
<B>(Unaudited)</B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Revenue:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Product
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">190,166</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">140,383</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">371,423</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">245,915</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Services
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73,798</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">80,177</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">153,818</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">155,992</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Maintenance
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83,611</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">78,122</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">166,991</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">154,268</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">347,575</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">298,682</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">692,232</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">556,175</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Costs and Expenses:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of product
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,820</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,501</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">43,483</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">40,979</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of services
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">48,765</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">52,182</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,481</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">101,183</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of maintenance
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,918</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,329</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,876</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">29,518</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Marketing and sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">96,163</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">95,031</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189,650</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">181,198</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Research and development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73,902</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">65,772</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">144,882</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">128,345</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General and administrative
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,454</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23,751</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">58,209</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46,283</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of acquired intangibles
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,928</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,868</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47,920</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39,534</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of deferred stock
	compensation<SUP>(1)</SUP>
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,175</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,115</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Restructuring, asset impairment, and unusual items
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67,704</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">84,788</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total costs and expenses
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">384,829</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">292,434</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">717,404</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">567,040</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income (loss)&nbsp;from operations
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(37,254</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,248</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,172</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(10,865</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other income, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">536</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,407</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,453</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income (loss)&nbsp;before provision
	(benefit)&nbsp;for income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(36,718</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,655</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,014</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,412</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Provision (benefit)&nbsp;for income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,829</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,029</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,229</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net income (loss)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(28,889</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,626</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,067</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,183</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Basic net income (loss)&nbsp;per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.12</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.10</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.03</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Diluted net income (loss)&nbsp;per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.12</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.10</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.03</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Weighted average common shares outstanding
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">248,020</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244,404</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244,609</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244,516</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Weighted average common and potential common
	shares outstanding&nbsp;&#151; assuming dilution
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">248,020</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">258,583</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244,609</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244,516</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
--------------------------------------------------------------------------
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="4%"></TD>
	<TD width="96%"></TD>
</TR>

<TR valign="top">
	<TD><SUP>(1)</SUP>&nbsp;</TD>
	<TD align="left">
	Amortization of deferred stock compensation would be classified
	as follows:</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of services
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,441</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,047</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Marketing and sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,550</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,785</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Research and development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,658</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,078</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General and administrative
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,526</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,205</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,175</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,115</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
The accompanying notes are an integral part of these condensed
consolidated financial statements.

<P align="center"><FONT size="2">4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>CADENCE DESIGN SYSTEMS, INC.</B>

<!-- link3 "CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS" -->
<DIV align="left"><A NAME="005"></A></DIV>

<DIV align="center">
<B>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</B>
</DIV>

<DIV align="center">
<B>(In thousands)</B>
</DIV>

<DIV align="center">
<B>(Unaudited)</B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="5"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="5" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and Cash Equivalents at Beginning of Period
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">85,220</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">111,401</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="5" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash Flows from Operating Activities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net loss
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,067</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,183</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Adjustments to reconcile net loss to net cash
	provided by operating activities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Depreciation and amortization
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">120,555</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">95,819</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net investment gain on sale, equity gain, and
	write-downs
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,476</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,124</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Minority interest income
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,959</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Fair market value of options issued to consultants
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(897</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(137</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Write-off of acquired in-process technology
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,100</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Write-off of goodwill
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,834</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Non-cash restructuring and other related charges
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,495</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Provisions for losses on trade accounts receivable
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,347</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">883</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Changes in current assets and liabilities, net of
	effect of acquired and disposed businesses:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Receivables
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(60,908</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(65,265</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Inventories
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,384</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(809</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Prepaid expenses and other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(14,953</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(24,458</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Installment contract receivables
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,357</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38,251</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Accounts payable and accrued liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,209</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,682</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Deferred revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,191</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">40,352</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other long-term liabilities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,353</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,247</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash provided by operating activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">81,822</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">88,409</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="5" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash Flows from Investing Activities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Maturities of short-term investments&nbsp;&#151;
	held-to-maturity
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">999</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Maturities of short-term investments&nbsp;&#151;
	available-for-sale
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,463</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,107</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Purchases of short-term investments&nbsp;&#151;
	available-for-sale
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(19,741</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Purchases of property, plant, and equipment
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(74,706</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(46,652</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Capitalization of software development costs
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,332</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(14,714</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Increase in acquired intangibles and other assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,115</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(21,848</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Investment in venture capital partnership and
	equity investments
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(90</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(497</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash effect of business acquisitions
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,188</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,503</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Sale of put warrants
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,032</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,516</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Purchase of call options
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(12,032</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,516</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash used for investing activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(56,709</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(86,108</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="5" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash Flows from Financing Activities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Proceeds from long-term debt and capital leases
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">184,949</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Principal payments on long-term debt and capital
	leases
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(186,235</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(21,763</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Proceeds from issuance of common stock
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,030</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">40,945</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Purchases of treasury stock
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(101,372</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(98,631</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Repurchase of minority interest
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,342</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Proceeds from transfer of financial assets in
	exchange for cash
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">91,704</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">80,808</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net cash provided by financing activities
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23,734</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,359</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="5" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Effect of exchange rate changes on cash
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,030</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,896</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="5" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net increase in cash and cash equivalents
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44,817</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,764</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="5" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash and Cash Equivalents at End of Period
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">130,037</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">113,165</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
The accompanying notes are an integral part of these condensed
consolidated financial statements.

<P align="center"><FONT size="2">5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>CADENCE DESIGN SYSTEMS, INC.</B>

<!-- link3 "NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="006"></A></DIV>

<DIV align="center">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center">
<B>(Unaudited)</B>
</DIV>

<P align="left">
<B>Basis of Presentation</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The condensed consolidated financial statements included herein
have been prepared by Cadence, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included
in consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. However, Cadence
believes that the disclosures are adequate to make the
information presented not misleading. These condensed
consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto
included in Cadence&#146;s Annual Report on Form&nbsp;10-K for
the fiscal year ended December&nbsp;30, 2000.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited condensed consolidated financial statements
included herein reflect all adjustments (which include only
normal, recurring adjustments) that are, in the opinion of
management, necessary to state fairly the results for the
periods presented. The results for such periods are not
necessarily indicative of the results to be expected for the
full fiscal year.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of condensed consolidated financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the condensed consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain amounts in the consolidated financial statements as of
December 30, 2000 and for the three and six months ended
July&nbsp;1, 2000 have been reclassified to conform with the
June&nbsp;30, 2001 presentation.

<P align="left">
<B>Acquisitions</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the three months ended June&nbsp;30, 2001, Cadence acquired
substantially all of the assets of two companies for an
aggregate price of $10.5&nbsp;million, net of acquisition costs,
of which $4.4&nbsp;million was cash and $6.1&nbsp;million was
shares of Cadence common stock, plus future contingent payments.
The acquisitions were accounted for as a purchase. Upon
consummation of the acquisitions, Cadence immediately charged to
expense $1&nbsp;million representing acquired in-process
technology that had not yet reached technological feasibility
and had no alternative future use.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2001, Cadence acquired CadMOS Design Technology,
Inc., a privately-held design tools firm headquartered in San
Jose. CadMOS provides solutions to the noise problems
experienced in ultra-deep submicron processes. Its
noise-analysis solutions are targeted at both digital and mixed
signal designers working on microprocessors, dynamic random
access memory, mixed-signal System-on-a-Chip, and
application-specific integrated circuits. Cadence acquired all
of the outstanding stock of CadMOS and assumed all outstanding
stock options and warrants. The purchase price was
$92.7&nbsp;million and the acquisition was accounted for as a
purchase. The purchase price could increase up to an additional
$12.6&nbsp;million, representing up to 488,970 shares, if
certain predetermined performance factors are achieved over the
next three years. Of the $12.6&nbsp;million, $1.7&nbsp;million
is contingent on continued employment of certain specified
individuals. The $12.6&nbsp;million is based on the share price
of Cadence&#146;s common stock at the time of the acquisition.
In connection with the acquisition, Cadence acquired goodwill of
$58.3&nbsp;million, which is being amortized over 5&nbsp;years,
and technology and workforce intangibles of $12.9&nbsp;million,
which are being amortized over 3 to 5&nbsp;years. The results of
operations of CadMOS and the estimated fair value of the assets
acquired and liabilities assumed are included in Cadence&#146;s
consolidated financial statements from the date of acquisition.

<P align="center"><FONT size="2">6
</FONT>

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon consummation of the CadMOS acquisition, Cadence immediately
charged to expense $12.1&nbsp;million representing acquired
in-process technology that had not yet reached technological
feasibility and had no alternative future use. See
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&nbsp;&#151; Unusual
Items.&#148; The value assigned to acquired in-process
technology was determined by identifying research projects in
areas for which technological feasibility has not been
established. The value was determined by estimating the costs to
develop the acquired in-process technology into commercially
viable products, estimating the resulting net cash flows from
such projects, and discounting the net cash flows back to their
present value. The discount rate included a factor that took
into account the uncertainty surrounding the successful
development of the acquired in-process technology. The
in-process technology is expected to be commercially viable in
2002. Expenditures to complete the in-process technology are
expected to total approximately $1.8&nbsp;million. These
estimates are subject to change, given the uncertainties of the
development process, and no assurance can be given that
deviations from these estimates will not occur. Additionally,
these projects will require additional research and development
after they have reached a state of technological and commercial
feasibility.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Comparative pro forma financial information for all acquisitions
has not been presented because the results of operations were
not material to Cadence&#146;s consolidated financial statements.

<P align="left">
<B>Restructuring, Asset Impairment, and Unusual Items</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the second quarter of 2001, Cadence announced a worldwide
restructuring plan targeted at reducing workforce and
consolidating facilities and assets.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence recorded $32.7&nbsp;million of restructuring charges
classified as unusual operating expenses associated with the
worldwide restructuring plan. Cadence&#146;s restructuring plan
and associated costs consisted of $11.3&nbsp;million for
reduction in personnel and $21.4&nbsp;million to downsize and
close excess facilities. The restructuring plan was initiated
primarily due to the severe downturn in the economic environment
in the electronics industry, particularly in the U.S. The
restructuring was primarily aimed at reducing excess personnel
and capacity costs. Management estimates that the restructuring
resulted in annualized cost reductions of approximately
$30.8&nbsp;million in salary and benefit costs and
$35.1&nbsp;million in facility costs.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The restructuring plan will result in the reduction of
approximately 325 employees. While employee reductions are
across all business functions, operating units, and geographic
regions, Cadence&#146;s wireless communications-related areas
will be affected more than other areas. In addition, the number
of temporary and contract workers employed by Cadence is being
reduced. Severance costs in the restructuring included severance
benefits, notice pay, and out-placement services. Approximately
$5.3&nbsp;million of these costs resulted from the payments to
certain participants in Cadence&#146;s employee stock purchase
plan prior to Tality&#146;s separation from Cadence in October
2000. All terminations and termination benefits were
communicated to the affected employees prior to June&nbsp;30,
2001. All severance benefits are expected to be paid out by the
end of 2001.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Facilities consolidation charges of $21.4&nbsp;million were
incurred in connection with the downsizing and closing of 16
sites. Closure and downsizing costs included payments required
under lease contracts, less any applicable sublease income after
the properties were abandoned, lease buyout costs, restoration
costs associated with certain lease arrangements, and costs to
maintain facilities during the period after abandonment. To
determine the lease loss, which is the loss after Cadence&#146;s
cost recovery efforts from subleasing a building, certain
assumptions were made related to the (1)&nbsp;time period over
which the relevant building would remain vacant,
(2)&nbsp;sublease terms, and (3)&nbsp;sublease rates, including
common area charges. The lease loss is an estimate under
Statement of Financial Accounting Standards No.&nbsp;5
<I>Accounting for Contingencies </I>and represents the low end
of the range, $10.8&nbsp;million, which will be adjusted in the
future upon certain triggering events (change in estimate of
time to sublease, actual sublease rates, etc.). Cadence has
estimated that the high end of the lease loss could be
$50.4&nbsp;million if facilities operating lease rental rates

<P align="center"><FONT size="2">7
</FONT>

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
continue to decrease in the applicable markets or if it takes
longer than expected to find a suitable tenant to sublease the
facility. Asset-related costs that were expensed consisted of
leasehold improvements for facilities that were abandoned and
whose estimated fair market value is zero. As of June&nbsp;30,
2001, two sites had been vacated and four sites had been
downsized.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In relation to the wireless communications business downsizing
and current decline in business conditions generally, Cadence
restructured certain of its businesses and realigned resources
to focus on profit contribution, high-growth markets, and core
opportunities. As a result, Cadence recorded a charge of
$25.8&nbsp;million related to the impairment of goodwill and
acquired intangibles associated with the acquisition of Diablo
Research Company LLC, or Diablo. Key factors in this write-off
were significant downsizing or reassignment of personnel
directly related to these assets and reduction of future
emphasis on this line of business. The charge was determined as
the amount by which the carrying value of the goodwill and
intangible assets associated with Diablo&#146;s acquisition
exceeded the fair value of those assets.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes Cadence&#146;s restructuring
activity for the six months ended June&nbsp;30, 2001:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15" align="center" nowrap><B><FONT size="1">For the Six Months Ended June 30, 2001</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Severance</FONT></B></TD>
	<TD></TD>
	<TD colspan="11"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">And</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Excess</FONT></B></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Facilities</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Assets</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Balance, December&nbsp;30, 2000.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,319</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,938</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">280</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,537</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">2001 restructuring charges
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,290</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,264</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,100</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,654</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Non-cash charges
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,787</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,910</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(11,681</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash charges
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(10,841</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(2,511</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(427</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(13,779</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Reclassifications
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">525</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">525</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Balance, June&nbsp;30, 2001.
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,784</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,429</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,043</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,256</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The majority of the restructuring reserve balance at
December&nbsp;30, 2000 was offset to the 2001 restructuring plan.

<P align="left">
<B>Inventories</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence&#146;s inventories include high technology parts and
components for complex computer systems that emulate the
performance and operation of computer chips and electronic
systems.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with its announced restructuring, Cadence recorded
a $5.8 million provision expense against inventory, which is
included in unusual items in the Condensed Consolidated
Statements of Operations. Of the $5.8&nbsp;million,
$3.7&nbsp;million related to two discontinued product lines as
part of Cadence&#146;s restructuring and $2.1&nbsp;million
related to excess inventory of emulation products. The
$3.7&nbsp;million related to inventory and other related costs
for two product lines Cadence will no longer sell. As part of
the restructuring, Cadence examined the business and determined
that these products would not result in future revenue growth.
The excess inventory charge of $2.1&nbsp;million was due to a
sudden and significant decrease in forecasted revenue for
emulation products and was calculated in accordance with
Cadence&#146;s policy, which is based on inventory in excess of
12-month demand. Inventory purchases and commitments are based
on future sales forecasts. Cadence typically buys and builds
inventory levels for certain key components to mitigate
component supply constraints. Based on our current 12-month
demand forecast, we do not anticipate that the excess inventory
subject to this provision will be used at a later date.

<P align="center"><FONT size="2">8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of inventories follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">December 30,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Raw materials
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,691</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,897</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Work in process
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4,447</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,252</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total inventories, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,138</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,149</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B>Credit Facility</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;29, 2000, Cadence entered into two syndicated
senior unsecured credit facilities that allow Cadence to borrow
up to $350&nbsp;million, referred to as the 2000 Facilities. The
2000 Facilities replace a prior $355&nbsp;million revolving
credit facility, of which $177.5&nbsp;million terminated on
September&nbsp;27, 2000, and $177.5&nbsp;million was terminated
immediately prior to closing of the 2000 Facilities. One of the
new 2000 Facilities is a $100&nbsp;million three-year revolving
credit facility, referred to as the Three-Year Facility. The
other new facility is a $250&nbsp;million 364-day revolving
credit facility convertible into a two-year term loan, referred
to as the 364-Day Facility. The Three-Year Facility terminates
on September&nbsp;29, 2003. The 364-Day Facility will terminate
on September&nbsp;28, 2001, at which time the 364-Day Facility
may be converted to a two-year term loan with a maturity date of
September&nbsp;29, 2003, or, at the request of Cadence and with
the consent of members of the bank group that wish to do so, the
termination date of the 364-Day Facility may be extended for one
additional 364-day period with respect to the portion of the
364-Day Facility that a consenting bank holds. For both of the
2000 Facilities, Cadence has the option to pay interest based on
LIBOR plus a spread of between 1.25% and 1.50%, based on a
pricing grid tied to a financial covenant, or the higher of
(i)&nbsp;the Federal Funds Rate plus 0.50% or (ii)&nbsp;the
prime rate. As a result, Cadence&#146;s interest expense
associated with this borrowing will vary with market rates. In
addition, commitment fees are payable on the unused portion of
the Three-Year Facility at rates between 0.25% and 0.34% based
on a pricing grid tied to a financial covenant and on the unused
portion of the 364-Day Facility at a fixed rate of 0.20%.
Cadence may not borrow under the 364-Day Facility at any time
that any portion of the Three-Year Facility remains unused. The
2000 Facilities contain certain financial and other covenants.
At June&nbsp;30, 2001, there were no borrowings outstanding
under the 2000 Facilities.

<P align="left">
<B>Comprehensive Loss</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Comprehensive loss includes foreign currency translation gains
and losses and other unrealized gains and losses that have been
previously excluded from net income (loss)&nbsp;and reflected
instead in stockholders&#146; equity. A summary of comprehensive
loss follows:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Net income (loss)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(28,889</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,626</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,067</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,183</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Translation loss
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,462</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,549</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,715</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1,667</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Unrealized income (loss)&nbsp; on investments
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,022</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(20,826</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">332</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(27,603</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Comprehensive loss
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(28,329</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(16,749</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(28,450</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(35,453</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>Net Income (Loss) Per Share</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a reconciliation of the weighted average common
shares used to calculate basic net income (loss)&nbsp;per share
to the weighted average common and potential common shares used
to calculate diluted net income (loss) per share:

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Weighted average common shares used to calculate
	basic net income (loss)&nbsp;per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">248,020</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244,404</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244,609</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244,516</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Options
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,996</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Warrants and other contingent shares
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">712</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Puts
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,471</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="1" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Weighted average common and potential common
	shares used to calculate diluted net income (loss)&nbsp;per share
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">248,020</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">258,583</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244,609</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">244,516</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left"><HR size="4" noshade></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Options to purchase 52,568,767 shares of common stock were
outstanding for the three and six months ended June&nbsp;30,
2001, but were not included in the computation of diluted net
loss per share because their effect would be antidilutive. These
options expire at various dates through 2011. Put warrants to
purchase 5,123,800 shares of common stock were outstanding for
the three and six months ended June&nbsp;30, 2001, but were not
included in the computation of diluted net loss per share
because their effect would be antidilutive. The put warrants
outstanding during the three and six months ended June&nbsp;30,
2001 expire on various dates through February 2002. Warrants to
purchase 140,000 shares of common stock were outstanding for the
three and six months ended June&nbsp;30, 2001, but were not
included in the computation of diluted net loss per share
because their effect would be antidilutive. The warrants
outstanding expire in June 2003.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Options to purchase 19,374,536 shares of common stock were
outstanding for the three months ended July&nbsp;1, 2000, but
were not included in the computation of diluted net income per
share because their effect would be antidilutive. These options
expire at various dates through 2011.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Options to purchase 50,685,907 shares of common stock were
outstanding for the six months ended July&nbsp;1, 2000, but were
not included in the computation of diluted net loss per share
because their effect would be antidilutive. These options expire
at various dates through 2010. Put warrants to purchase
6,330,775 shares of common stock were outstanding for the six
months ended July&nbsp;1, 2000, but were not included in the
computation of diluted net loss per share because their effect
would be antidilutive. The put warrants outstanding during the
six months ended July&nbsp;1, 2000 expire on various dates
through February 2002. Warrants to purchase 140,000 shares of
common stock were outstanding for the six months ended
July&nbsp;1, 2000, but were not included in the computation of
diluted net loss per share because their effect would be
antidilutive. The warrants outstanding expire in June 2003.

<P align="left">
<B>Contingencies</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Refer to Part II, Item&nbsp;1 for a description of legal
proceedings.

<P align="left">
<B>Put Warrants and Call Options</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence has authorized a share repurchase program under which
repurchased shares with a value of up to $500&nbsp;million will
be used for general corporate purposes including the share
issuance requirements of Cadence&#146;s employee stock option
and purchase plans and acquisitions. See &#147;Subsequent
Events.&#148;

<P align="center"><FONT size="2">10
</FONT>

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of June&nbsp;30, 2001, Cadence had authorized three seasoned
systematic stock repurchase programs under which it repurchased
common stock to satisfy estimated requirements for shares to be
issued under its employee stock option and purchase plans.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of its authorized stock repurchase program, Cadence has
sold put warrants through private placements. At June&nbsp;30,
2001, there were 5.1&nbsp;million put warrants outstanding that
entitle the holder to sell one share of common stock to Cadence
on a specified date and at a specified price ranging from $23.87
to $26.90 per share. Additionally, during this same period,
Cadence purchased call options that entitle Cadence to buy one
share of common stock at a specified price to satisfy
anticipated stock repurchase requirements under Cadence&#146;s
systematic stock repurchase programs. At June&nbsp;30, 2001,
Cadence had 3.8&nbsp;million call options outstanding at prices
ranging from $24.12 to $27.15 per share. The put warrants and
call options outstanding at June&nbsp;30, 2001 expire on various
dates through February 2002 and Cadence has the contractual
ability to settle the options prior to their maturity. At
June&nbsp;30, 2001, the estimated fair value of the call options
was approximately $3&nbsp;million and the estimated fair value
of the put warrants was approximately $35.6&nbsp;million.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If exercised, Cadence has the right to settle the put warrants
with common stock equal to the difference between the exercise
price and the fair value of the common stock at the date of
exercise. Settlement of the put warrants with common stock could
cause Cadence to issue a substantial number of shares, depending
on the exercise price of the put warrants and the per share fair
value of Cadence&#146;s common stock at the time of exercise. In
addition, settlement of put warrants in common stock could lead
to the disposition by put warrant holders of shares of
Cadence&#146;s common stock that such holders may have
accumulated in anticipation of the exercise of the put warrants
or call options, which may adversely affect the price of
Cadence&#146;s common stock. At June&nbsp;30, 2001, Cadence had
the ability to settle these put warrants with common stock and,
therefore, no amount was classified out of stockholders&#146;
equity in the condensed consolidated balance sheets.

<P align="left">
<B>Tality Corporation</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On July&nbsp;17, 2000, Cadence announced its plan to separate
its electronics design services group into a new company named
Tality Corporation, or Tality. Tality&#146;s separation from
Cadence was substantially completed on October&nbsp;4, 2000, and
the electronic design services business now operates as a
majority-owned subsidiary of Cadence. Tality filed a
registration statement with the Securities and Exchange
Commission for Tality&#146;s initial public offering, or IPO. As
a result of the separation in the third quarter of 2000, Cadence
has recorded deferred stock compensation resulting from Tality
option grants and restricted stock sales. See
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations &#151; Unusual Items.&#148;
On October&nbsp;9, 2000, Cadence announced the postponement of
Tality&#146;s IPO due to unfavorable market conditions. As a
result of the postponement of the Tality IPO Cadence wrote off
$2.8&nbsp;million of IPO related expenses in the first quarter
of 2001. See &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations&nbsp;&#151;
Unusual Items.&#148; On April&nbsp;17, 2001, Cadence announced
the withdrawal of the Tality IPO registration statement. The
financial statements and financial information in this Quarterly
Report on Form&nbsp;10-Q do not give effect to the IPO. As a
result of a reorganization of the Tality entities during June
and July, 2001, Tality is currently an indirect wholly-owned
subsidiary of Cadence.

<P align="left">
<B>Minority Interest</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In relation to the postponement of the Tality IPO, Cadence and
Tality began to redeem the minority interest in Tality. As of
June&nbsp;30, 2001, Cadence had repurchased 0.6% minority
interest, leaving a minority interest of 1.7%. These remaining
shares outstanding were repurchased in the third quarter ending
September&nbsp;29, 2001. In conjunction with the transaction,
Cadence repurchased 455,000 restricted Tality shares from
certain Cadence executives and key employees by cancelling a
portion of the related notes

<P align="center"><FONT size="2">11
</FONT>

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
payable to Cadence owed by such Cadence executives and key
employees equal to the repurchase price for such shares. Tality
repurchased 220,000 restricted shares from three of its
directors. The purchase price was $6.10, the fair market value
of Tality stock at the time of repurchase.
</DIV>

<P align="left">
<B>Statement of Cash Flows</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The supplemental cash-flow information for the six months ended
June&nbsp;30, 2001 and July&nbsp;1, 2000 follows:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="60%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">For the Six Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30, 2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1, 2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash Paid During the Period For:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">967</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">942</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income taxes (including foreign withholding tax)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,357</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,905</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Non-Cash Investing and Financing Activities:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Capital lease obligations incurred for equipment
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">153</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">689</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Common stock and options issued for acquisitions
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">100,452</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Transfer of inventory to fixed assets
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,462</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Equity investment by transfer of equipment or
	software
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8,140</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Repurchase of restricted Tality stock and
	cancellation of a portion of related notes payable
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,775</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B>Segment Reporting</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1998, Cadence adopted Statement of Financial Accounting
Standards, or SFAS, No.&nbsp;131, &#147;Disclosures about
Segments of an Enterprise and Related Information.&#148; Under
SFAS No.&nbsp;131, operating segments are defined as components
of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating
decision maker when deciding how to allocate resources and when
assessing performance. Cadence&#146;s chief operating decision
making group is the Executive Staff, which includes
Cadence&#146;s President and Chief Executive Officer and
Cadence&#146;s other senior management. Cadence&#146;s Executive
Staff reviews the Cadence consolidated results within three
segments: Product, Services, and Maintenance, and also reviews
Tality&#146;s results separately as a stand-alone entity.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Product segment includes revenue and associated costs to
design and license to customers a variety of electronic design
automation products. The Services segment includes revenue and
associated costs to offer methodology and design services either
to assist companies in developing electronic designs or to
assume responsibility for the design effort when customers wish
to outsource this work. The Maintenance segment includes revenue
and associated costs primarily for a technical support
organization, and maintenance agreements are offered to
customers either as part of our product license agreements or
separately. Within the Cadence consolidated results, Tality
revenue is included in the Services segment, and associated
Tality costs are reflected in each of the three segments,
consistent with the benefit derived by the respective segments
from those services.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Segment income from operations is defined as gross margin under
generally accepted accounting principles and excludes
amortization of acquired intangibles, operating expenses
(marketing and sales, research and development, and general and
administrative), unusual items, other income, net, and income
taxes. Profitability information about Cadence&#146;s segments
is available only to the extent of gross margin by segment, and
operating expenses and other income and expense items are
managed on a functional basis. There are no differences between
the accounting policies used to measure profit and loss for
segments and

<P align="center"><FONT size="2">12
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
those used on a consolidated basis. Revenue is defined as
revenue from external customers with no intersegment revenue.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence&#146;s management does not identify or allocate its
assets, including capital expenditures, by operating segment.
Accordingly, assets are not being reported by segment because
the information is not available by segment and is not reviewed
by Cadence&#146;s Executive Staff to make decisions about
resources to be allocated among the segments or to assess their
performance. Depreciation and amortization of purchased software
is allocated among the segments in order to determine each
segment&#146;s gross margin.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following tables present information about reported segments
for the three months ended June&nbsp;30, 2001 and July&nbsp;1,
2000:

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="17%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><B><FONT size="1">For the Three Months Ended June 30, 2001</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Product</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Services</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Maintenance</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Tality</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="19"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">190,166</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73,798</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83,611</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">347,575</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">45,266</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21,820</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">48,765</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,918</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86,503</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,103</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of acquired intangibles
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,928</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,928</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Inventory write- down and other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,944</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,944</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,148</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Gross margin
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">168,346</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,033</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67,693</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(32,872</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">228,200</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12,015</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Marketing and sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(96,163</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(96,163</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,337</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Research and development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(73,902</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(73,902</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,206</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General and administrative
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(27,454</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(27,454</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,994</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of acquired intangibles
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,001</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of deferred stock compensation
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,175</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,175</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,205</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Unusual items
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(60,760</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(60,760</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(42,857</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other income (expense), net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">536</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">536</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(20</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income (loss) before provision (benefit) for
	income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">168,346</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25,033</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67,693</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(297,790</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(36,718</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(60,605</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">13
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="20%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><B><FONT size="1">For the Three Months Ended July 1, 2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Product</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Services</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Maintenance</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Tality</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">140,383</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">80,177</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">78,122</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">298,682</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47,257</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,501</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">52,182</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15,329</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">88,012</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,740</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of acquired intangibles
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,868</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19,868</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Gross margin
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">119,882</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,995</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">62,793</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(19,868</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">190,802</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,517</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Marketing and sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(95,031</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(95,031</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,726</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Research and development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(65,772</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(65,772</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(3,025</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General and administrative
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(23,751</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(23,751</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7,804</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of acquired intangibles
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(4,185</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Unusual items
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(741</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other income, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,407</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,407</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">470</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income (loss) before provision (benefit) for
	income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">119,882</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,995</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">62,793</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(203,015</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7,655</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(13,494</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following tables present information about reported segments
for the six months ended June&nbsp;30, 2001 and July&nbsp;1,
2000:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="20%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><B><FONT size="1">For the Three Months Ended June 30, 2001</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Product</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Services</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Maintenance</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Tality</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">371,423</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">153,818</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">166,991</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">- - - -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">692,232</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">89,446</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">43,483</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102,481</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,876</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">178,840</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">70,918</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of acquired intangibles
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47,920</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47,920</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Inventory write- down and other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,944</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,944</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1,148</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Gross margin
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">327,940</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,337</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">134,115</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(54,864</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">458,528</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,380</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Marketing and sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(189,650</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(189,650</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(16,665</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Research and development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(144,882</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(144,882</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(12,402</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General and administrative
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(58,209</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(58,209</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(24,431</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of acquired intangibles
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,026</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of deferred stock compensation
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(13,115</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(13,115</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(6,743</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Unusual items
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(77,844</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(77,844</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(46,218</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other income (expense), net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp; -</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(679</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income (loss) before provision (benefit) for
	income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">327,940</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51,337</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">134,115</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(538,406</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(25,014</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(97,784</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">15
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="17%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><B><FONT size="1">For the Three Months Ended July 1, 2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Product</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Services</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Maintenance</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Tality</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="19"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="19" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">245,915</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">155,992</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">154,268</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">556,175</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">90,284</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cost of revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">40,979</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">101,183</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">29,518</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">171,680</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">70,178</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of acquired intangibles
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39,534</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39,534</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Gross margin
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">204,936</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">54,809</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">124,750</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(39,534</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">344,961</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20,106</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Marketing and sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(181,198</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(181,198</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(16,669</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Research and development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(128,345</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(128,345</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(5,797</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General and administrative
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(46,283</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(46,283</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(15,679</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of acquired intangibles
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,093</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Unusual items
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(741</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other income, net
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,453</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,453</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">532</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Income (loss) before provision (benefit) for
	income taxes
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">204,936</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">54,809</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">124,750</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(392,907</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8,412</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(26,341</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Internationally, excluding Japan, Cadence markets and supports
its products and services primarily through its subsidiaries and
various distributors. Cadence licenses its products in Japan
through Innotech Corporation, in which Cadence is an
approximately 15% stockholder. Cadence markets its methodology
and design services in Japan through a wholly-owned subsidiary.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues are attributed to geographic areas based on the country
in which the customer is domiciled. In the three months ended
June&nbsp;30, 2001, there were two customers that accounted for
more than 10% of total revenues. In the six months ended
June&nbsp;30, 2001, and the three and six months ended
July&nbsp;1, 2000, no one customer accounted for more than 10%
of total revenues. Long-lived assets are attributed to
geographic areas based on the country where the assets are
located.

<P align="center"><FONT size="2">16
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents a summary of revenues by geographic
region for the three months ended June&nbsp;30, 2001 and
July&nbsp;1, 2000:

<CENTER>
<TABLE width="50%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">For the Three Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">North America:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">United States
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189,423</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">160,542</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,739</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,115</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total North America
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">201,162</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">169,657</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Europe:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">United Kingdom
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35,568</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,065</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Germany
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,852</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22,270</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38,156</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27,243</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Europe
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">85,576</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">71,578</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Japan and Asia:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Japan
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">43,466</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44,077</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Asia
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17,371</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13,370</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Japan and Asia
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">60,837</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">57,447</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">347,575</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">298,682</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents a summary of revenues and
long-lived assets by geographic region for the six months ended
June&nbsp;30, 2001 and July&nbsp;1, 2000:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">For the Six Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">For the Six Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">June 30, 2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">July 1, 2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Long-Lived</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Long-Lived</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Revenues</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Assets</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Revenues</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Assets</FONT></B></TD>
</TR>

<TR>
	<TD colspan="4"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">North America:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">United States
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">398,949</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">330,792</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">312,571</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">283,934</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18,756</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2,890</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14,091</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,336</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total North America
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">417,705</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">333,682</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">326,662</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">287,270</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Europe:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">United Kingdom
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">30,994</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26,918</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">43,991</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32,912</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Germany
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">48,960</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">772</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31,756</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">732</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">65,682</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10,497</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46,307</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,556</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Europe
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">145,636</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38,187</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">122,054</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39,200</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="4" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Japan and Asia:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Japan
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">92,387</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3,233</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83,342</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,355</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Asia
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">36,504</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6,757</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24,117</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5,930</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total Japan and Asia
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">128,891</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">9,990</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">107,459</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11,285</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">692,232</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">381,859</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">556,175</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">337,755</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">17
</FONT>

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>Subsequent Events</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;1, 2001, Cadence&#146;s Board of Directors
approved an authorization to repurchase up to $500&nbsp;million
of common stock. The repurchased shares will be used for general
corporate purposes including the share issuance of employee
stock option and purchase plans and acquisitions. Share
repurchases under this authorization may be made in the open
market or in privately negotiated transactions.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On July&nbsp;25, 2001, Avant! Corporation was ordered to pay
Cadence $195&nbsp;million in criminal restitution after Avant!
entered a plea of no contest and was found guilty by the
Superior Court of the State of California of conspiracy to take
and use Cadence&#146;s trade secrets. Cadence received
$100&nbsp;million of this amount on July&nbsp;26, 2001, and
$40&nbsp;million on August&nbsp;1, 2001. Avant! has publicly
stated that it cannot currently pay the remainder of the award,
and that it is seeking additional sources of funding to pay the
$55&nbsp;million balance. Cadence is negotiating a security
agreement with Avant! to secure the remaining payments.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On July&nbsp;1, 2001, Cadence adopted two employee stock
purchase plans to allow Tality employees to participate in
Cadence&#146;s employee benefit plan. The two plans are the 2001
Employee Stock Purchase Plan, which is a qualified employee
stock purchase plan under the Internal Revenue Code, and the
Non-Qualified Stock Purchase Plan, which is an employee stock
purchase plan not qualified under the Internal Revenue Code and
will be primarily used for Tality employees located outside the
U.S. Other than the qualified nature of the 2001 Employee Stock
Purchase Plan, the provisions of the two plans are the same. The
qualified plan will be presented to Cadence stockholders for
approval at Cadence&#146;s next annual meeting.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The plans are administered by Cadence&#146;s board of directors
or by a committee appointed by the board. Tality employees,
including officers and employee directors but excluding 5% or
greater stockholders, are eligible to participate if they are
regular employees who work 20 hours or more per week.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each offering period will normally have four purchase periods,
which will result in four purchase dates during each offering
period. The purchase periods, other than the initial two periods
under the plan, are generally the same as those under the
current Cadence employee stock purchase plan.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The plans permit eligible Tality employees to purchase Cadence
common stock through payroll deductions, which, except for the
first purchase period, may not exceed 12% of an employee&#146;s
compensation. During each purchase period, payroll deductions
will accumulate without interest. On the last business day of
each purchase period, accumulated payroll deductions will be
used to purchase Cadence common stock. Other terms of these
plans are generally the same as the terms of the current Cadence
employee stock purchase plan.

<P align="center"><FONT size="2">18
</FONT>

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link2 "Item 2.Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations" -->
<DIV align="left"><A NAME="007"></A></DIV>

<P align="left">
<B>
Item&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management&#146;s
 Discussion and Analysis of Financial Condition and Results of
Operations</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following discussion should be read in conjunction with
the Condensed Consolidated Financial Statements and notes
thereto included elsewhere in this quarterly report on
Form&nbsp;10-Q. Except for historical information, the following
discussion contains forward-looking statements based on current
expectations that involve certain risks and uncertainties.
Cadence&#146;s actual results could differ materially from those
discussed herein. Factors that could cause actual results or
performance to differ materially or contribute to such
differences include, but are not limited to, those discussed
below in &#147;Results of Operations,&#148; &#147;Liquidity and
Capital Resources,&#148; &#147;Factors That May Affect Future
Results,&#148; and &#147;Disclosures about Market Risk.&#148;</I>

<P align="left">
<B>Overview</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence provides comprehensive software and other technology and
offers design and methodology services for the product
development requirements of the world&#146;s leading electronics
companies. Cadence licenses its leading-edge electronic design
automation, or EDA, software and hardware technology and
provides a range of services to its customers throughout the
world to help them optimize their product development processes.
Cadence is a supplier of end-to-end products and services that
are used to design and develop complex chips and electronic
systems including semiconductors, computer systems and
peripherals, telecommunications and networking equipment, mobile
and wireless devices, automotive electronics, consumer products,
and other advanced electronics.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In recent years, the worldwide electronics industry has
experienced expansion driven primarily by the communications
(networking and wireless) markets. More recently, however, both
the U.S. economy in general and the electronics industry in
particular began to experience a slowdown in late 2000, the
severity of which has increased in 2001. The electronics
industry slowdown, especially in the semiconductor industry, may
reduce our revenue and harm Cadence&#146;s results of operations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On July&nbsp;25, 2001, Avant! Corporation was ordered to pay
Cadence $195 million in criminal restitution after Avant!
entered a plea of no contest and was found guilty by the
Superior Court of the State of California of conspiracy to take
and use Cadence&#146;s trade secrets. Cadence received
$100&nbsp;million of this amount on July&nbsp;26, 2001, and
$40&nbsp;million on August&nbsp;1, 2001. Avant! has publicly
stated that it cannot currently pay the remainder of the award,
and that it is seeking additional sources of funding to pay the
$55&nbsp;million balance. Cadence is negotiating a security
agreement with Avant! to secure the remaining payments.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the three months ended June&nbsp;30, 2001, Cadence acquired
substantially all of the assets of two companies for an
aggregate price of $10.5&nbsp;million, net of acquisition costs,
of which $4.4&nbsp;million was cash and $6.1&nbsp;million was
shares of Cadence common stock, plus future contingent payments.
The acquisitions were accounted for as a purchase. Upon
consummation of the acquisitions, Cadence immediately charged to
expense $1&nbsp;million representing acquired in-process
technology that had not yet reached technological feasibility
and had no alternative future use.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2001, Cadence acquired CadMOS Design Technology,
Inc., a privately held design tools firm headquartered in San
Jose. CadMOS provides solutions to the noise problems
experienced in ultra-deep submicron processes. Its
noise-analysis solutions are targeted at both digital and mixed
signal designers working on microprocessors, dynamic random
access memory, mixed-signal System-on-a-Chip, and
application-specific integrated circuits. Cadence acquired all
of the outstanding stock of CadMOS and assumed all outstanding
stock options and warrants. The purchase price was
$92.7&nbsp;million and the acquisition was accounted for as a
purchase. The purchase price could increase up to an additional
$12.6&nbsp;million, representing up to 488,970 shares, if
certain predetermined performance factors are achieved over the
next three years. Of the $12.6&nbsp;million, $1.7&nbsp;million
is contingent on continued employment. The $12.6&nbsp;million is
based on the share price of Cadence&#146;s common stock at the
time of the acquisition. In connection with the acquisition,
Cadence acquired goodwill of $58.3&nbsp;million, which is being
amortized over 5&nbsp;years, and

<P align="center"><FONT size="2">19
</FONT>

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
technology and workforce intangibles of $12.9&nbsp;million,
which are being amortized over 3 to 5&nbsp;years. The results of
operations of CadMOS and the estimated fair value of the assets
acquired and liabilities assumed are included in Cadence&#146;s
consolidated financial statements from the date of acquisition.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On July&nbsp;17, 2000, Cadence announced its plan to separate
its electronics design services group into a new company named
Tality Corporation, or Tality. Tality&#146;s separation from
Cadence was substantially completed on October&nbsp;4, 2000, and
the electronic design services business now operates as a
majority-owned subsidiary of Cadence. Tality filed a
registration statement with the Securities and Exchange
Commission for Tality&#146;s initial public offering, or IPO. As
a result of the separation in the third quarter of 2000, Cadence
has recorded deferred stock compensation resulting from Tality
option grants and restricted stock sales. See
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&nbsp;&#151; Unusual
Items.&#148; On October&nbsp;9, 2000, Cadence announced the
postponement of Tality&#146;s IPO due to unfavorable market
conditions. As a result of the postponement of the Tality IPO
Cadence wrote off $2.8&nbsp;million of IPO related expenses in
the first quarter of 2001. See &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&nbsp;&#151; Unusual Items.&#148; On April&nbsp;17,
2001, Cadence announced the withdrawal of the Tality IPO
registration statement. The financial statements and financial
information in this Quarterly Report on Form&nbsp;10-Q do not
give effect to the IPO. As a result of a reorganization of the
Tality entities during June and July, 2001, Tality is currently
an indirect wholly-owned subsidiary of Cadence.

<P align="left">
<B>Results of Operations</B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">% Change</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">% Change</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><B><FONT size="1">(In millions, except percentages)</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><I><FONT size="2">Revenue</FONT></I></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Product
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">190.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">140.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">371.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">245.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Services
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">80.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">153.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">156.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Maintenance
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">83.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">78.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">167.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">154.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">347.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">298.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">692.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">556.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B>&nbsp;&nbsp;&nbsp;<I>Sources of Revenue as a Percent of Total
Revenue</I></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Product
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">55%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">54%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Services
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Maintenance
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Product revenue increased $49.8&nbsp;million and
$125.5&nbsp;million in the three and six months ended
June&nbsp;30, 2001, respectively, when compared to the same
periods in 2000, primarily due to an increase in license
renewals with major customers as well as an increase in new
sales of Cadence&#146;s software products. The increase in sales
volume of products in the three months ended June&nbsp;30, 2001
was primarily due to the increased sales volume of integrated
circuit implementation products, which include place and route,
physical design, and physical verification products. The
increase in sales volume in the six months ended June&nbsp;30,
2001 was due to an overall increase in sales volume of
Cadence&#146;s software products. The increase in sales volume
of products was primarily attributable to higher sales of
integrated circuit implementation products, intellectual
property creation products, and printed circuit board-related
products. In the three and six months ended June&nbsp;30, 2001,
more than one third of software revenue came from Cadence&#146;s
ratable software license arrangements. In the three and six
months ended July&nbsp;1, 2000, more than 15% of software
revenue came from Cadence&#146;s ratable software license
arrangements. The percentage of ratable revenue will

<P align="center"><FONT size="2">20
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
vary, in any given quarter, depending on the actual mix of
revenue generated from Cadence&#146;s various licensing models.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Services revenue decreased $6.4&nbsp;million and
$2.2&nbsp;million in the three and six months ended
June&nbsp;30, 2001, respectively, when compared to the same
periods in 2000, primarily due to Tality&#146;s decline in
revenue. Tality&#146;s revenue declined primarily due to fewer
active engagements and decreased total client service hours
billed. Tality&#146;s revenue is expected to continue to be
affected by the slowdown in the economy and electronics industry
specifically, with flat sequential revenue expected through the
rest of the year.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Maintenance revenue increased $5.5&nbsp;million and
$12.7&nbsp;million in the three and six months ended
June&nbsp;30, 2001, respectively, when compared to the same
periods in 2000, primarily due to the growth of the installed
customer base and the renewal of maintenance and support
contracts.

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><FONT size="1">June 30,</FONT></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">% Change</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">% Change</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><B><FONT size="1">(In millions, except percentages)</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><I><FONT size="2">Revenue by Geography</FONT></I></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Domestic
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">160.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">398.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">312.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">International
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">158.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">138.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">293.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">243.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total revenue
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">347.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">298.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">692.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">556.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B>&nbsp;&nbsp;&nbsp;<I>Revenue by Geography as a Percent of
Total Revenue</I></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Domestic
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">54%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">54%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">58%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">56%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">International
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">42%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">44%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
International revenue increased $20&nbsp;million and
$49.7&nbsp;million in the three and six months ended
June&nbsp;30, 2001, respectively, when compared to the same
periods in 2000. The increase in the three months ended
June&nbsp;30, 2001 was primarily due to increases in product
revenue in all regions, services revenue in Japan and Asia, and
maintenance revenue in Europe, partially offset by decreases in
maintenance revenue in Japan and Asia and services revenue in
Europe. The increase in the six months ended June&nbsp;30, 2001
was primarily due to increases in product revenue in all
regions, maintenance revenue in Europe and Asia, and services
revenue in Europe, partially offset by decreases in services
revenue in Japan, Asia, and Canada and maintenance revenue in
Japan.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Differences in the rate of revenue growth over the periods
presented and as compared geographically are primarily due to
fluctuations in sales volume of integrated circuit
implementation and intellectual property creation products and
for Cadence&#146;s design and methodology services offerings.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Foreign currency exchange rates negatively affected revenue by
$5.2&nbsp;million and $9.8&nbsp;million during the three and six
months ended June&nbsp;30, 2001, respectively, when compared to
the same periods in 2000, primarily due to the weakening of the
Japanese yen in relation to the U.S. dollar.

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="26%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July&nbsp;1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July&nbsp;1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">% Change</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">% Change</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><B><FONT size="1">(In millions, except percentages)</FONT></B></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><I><FONT size="2">Cost of Revenue</FONT></I></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Product
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">43.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">41.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Services
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">48.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">52.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(7</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">102.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">101.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Maintenance
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">29.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>&nbsp;&nbsp;&nbsp;<I>Cost of Revenue as a Percent of Related
Revenue</I></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Product
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">15%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">17%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Services
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">66%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">65%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">65%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Maintenance
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">20%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cost of product revenue includes costs of production personnel,
packaging and documentation, royalties, and amortization of
capitalized software development costs for software products.
Manufacturing costs associated with hardware emulation system
products include materials, labor, and overhead.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cost of product revenue increased $1.3&nbsp;million for the
three months ended June&nbsp;30, 2001, when compared to the same
period in 2000, primarily due to an increase in amortization of
software development costs and third-party royalty costs,
partially offset by a decrease in manufacturing expenses
associated with emulation system products. Cost of product
revenue increased $2.5&nbsp;million for the six months ended
June&nbsp;30, 2001, when compared to the same period in 2000,
primarily due to third-party royalty costs and purchased
software amortization.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because the majority of Cadence&#146;s cost of software product
revenue does not vary significantly with changes in revenue,
product gross margin increased in the three and six months ended
June&nbsp;30, 2001, when compared to the same period in 2000,
primarily due to an increase in price and volume of license
renewals with major customers.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cost of services revenue includes costs associated with
providing services to customers, primarily salaries and costs to
recruit, develop, and retain personnel, and costs to maintain
the infrastructure necessary to manage a services organization.
Cost of services revenue decreased $3.4&nbsp;million in the
three months ended June&nbsp;30, 2001, when compared to the same
period in 2000, primarily due to Cadence&#146;s reduction of
services professionals and employee-related costs. Cost of
services revenue increased $1.3&nbsp;million in the six months
ended June&nbsp;30, 2001, when compared to the same period in
2000, primarily due to Cadence&#146;s addition of services
professionals and employee-related costs that occurred in the
three months ended March&nbsp;31, 2001, partially offset by the
reduction in employee-related costs in the three months ended
June&nbsp;30, 2001.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Services gross margin slightly decreased for the three and six
months ended June&nbsp;30, 2001, when compared to the same
periods in 2000, primarily due to increased headcount in Tality
in anticipation of increased demand which did not materialize.
Services gross margin has been, and may continue to be, harmed
by Cadence&#146;s inability to fully utilize its services
resources. In addition, services gross margin may continue to be
harmed by the slowdown in the economy generally and in the
electronics systems industry in particular.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cost of maintenance revenue includes the cost of customer
services, such as hot-line and on-site support, production
personnel, packaging, and documentation of maintenance updates.
Cost of maintenance revenue remained flat and increased
$3.4&nbsp;million for the three and six months ended
June&nbsp;30, 2001, respectively, when compared to the same
periods in 2000. The increase for the six months ended
June&nbsp;30, 2001 was primarily due to an increase in
employee-related costs.

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="26%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July&nbsp;1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July&nbsp;1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">% Change</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">% Change</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="23"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="23" align="center" nowrap><B><FONT size="1">(In millions, except percentages)</FONT></B></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><I><FONT size="2">Operating Expenses</FONT></I></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Marketing and sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">96.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">95.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">189.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">181.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Research and development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">73.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">65.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">144.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">128.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General and administrative
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">58.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">46.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">26</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">
<B>&nbsp;&nbsp;&nbsp;<I>Expenses as a Percent of Total
Revenue</I></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Marketing and sales
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">28%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">27%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">33%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Research and development
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">22%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">21%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">23%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">General and administrative
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Marketing and sales expenses increased $1.1&nbsp;million and
$8.5&nbsp;million in the three and six months ended
June&nbsp;30, 2001, respectively, when compared to the same
periods in 2000, primarily due to an increase in
employee-related costs.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Research and development expenses, prior to the reduction for
capitalization of software development costs, were
$81.6&nbsp;million, representing 23% of total revenue, in the
three months ended June&nbsp;30, 2001, and $71.7&nbsp;million,
representing 24% of total revenue, for the three months ended
July&nbsp;1, 2000. For the three and six months ended
June&nbsp;30, 2001, Cadence capitalized software development
costs of $7.7&nbsp;million and $15.3&nbsp;million, respectively,
representing 9% and 10% of total research and development
expenditures, respectively. For the three and six months ended
July&nbsp;1, 2000, Cadence capitalized software development
costs of $5.9&nbsp;million and $14.7&nbsp;million, respectively,
representing 8% and 10% of total research and development
expenditures, respectively. The increase in capitalized software
development costs for the three and six month periods ended
June&nbsp;30, 2001, resulted primarily from increases in new
product development projects in which costs are expensed until
technological feasibility is established. In any given period,
the amount of capitalized software development costs may vary
depending on the exact nature of the development performed.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The increase in net research and development expenses of
$8.1&nbsp;million and $16.5&nbsp;million for the three and six
months ended June&nbsp;30, 2001, respectively, when compared to
the same periods in 2000, was primarily due to employee-related
costs and increased investment in research and development
projects.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
General and administrative expenses increased $3.7&nbsp;million
and $11.9&nbsp;million in the three and six months ended
June&nbsp;30, 2001, respectively, when compared to the same
periods in 2000, primarily due to an increased use of outside
consulting services and increases in bad debt expense, primarily
in Tality.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Foreign currency exchange rates positively affected operating
expenses by $3&nbsp;million and $5.8&nbsp;million for the three
and six months ended June&nbsp;30, 2001, respectively, when
compared to the same periods in 2000, primarily due to the
weakening of the Japanese yen and the British pound in relation
to the U.S. dollar.

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><FONT size="1">June&nbsp;30,</FONT></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July&nbsp;1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July 1,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="15" align="center" nowrap><B><FONT size="1">(In millions)</FONT></B></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><I><FONT size="2">Amortization of Acquired
	Intangibles</FONT></I></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of acquired intangibles
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">19.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">47.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">39.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B>&nbsp;&nbsp;&nbsp;<I>Amortization of Acquired Intangibles as
a Percent of Total Revenue</I></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of acquired intangibles
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">23
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Amortization of acquired intangibles increased $6&nbsp;million
and $8.4&nbsp;million in the three and six months ended
June&nbsp;30, 2001, respectively, when compared with the same
periods in 2000, primarily due to the 2001 acquisition of CadMOS.

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July&nbsp;1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July&nbsp;1,</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD></TD>
	<TD></TD>
	<TD colspan="15" align="center" nowrap><B><FONT size="1">(In millions)</FONT></B></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<B><I><FONT size="2">Amortization of Deferred Stock
	Compensation</FONT></I></B></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of deferred stock compensation
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><I>&nbsp;&nbsp;&nbsp;Amortization of Deferred Stock
Compensation as a Percent of Total Revenue</I></B>

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<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Amortization of deferred stock compensation
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence records deferred stock compensation resulting from
Tality option grants for Tality stock, Tality restricted stock
sales, and Cadence&#146;s acquisition of CadMOS. Deferred stock
compensation from Tality option grants and restricted stock
sales represents the difference between the exercise price of
stock option grants to Tality employees and directors, and
restricted stock sales to certain Cadence executives and key
employees, and the deemed fair market value of Tality&#146;s
common stock at the time of those grants and sales. Deferred
stock compensation from the CadMOS acquisition represents the
difference between the exercise price of stock option grants to
CadMOS employees and the fair market value of Cadence&#146;s
common stock at the time of acquisition. Cadence is amortizing
the deferred stock compensation to expense over the period
during which the stock options and restricted stock vest.
Cadence recorded $7.2&nbsp;million and $13.1&nbsp;million in the
three and six months ended June&nbsp;30, 2001, respectively, of
amortization of deferred stock compensation for which there were
no similar costs in the first six months of 2000.

<P align="left">
<B><I>&nbsp;&nbsp;&nbsp;Unusual Items</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents information regarding unusual items
for the three and six months ended June&nbsp;30, 2001:

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
	<TD></TD>
	<TD colspan="7"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July&nbsp;1,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">July&nbsp;1,</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15"></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="15" align="center" nowrap><B><FONT size="1">(In millions)</FONT></B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Restructuring charges
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">32.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">34.2</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Goodwill write-off
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Inventory write-off and other
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">6.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Separation costs
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">4.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Write-off of acquired in-process technology
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">13.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total unusual items
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">67.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">84.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">-&nbsp;-&nbsp;-&nbsp;-</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
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<P align="left">
<I>&nbsp;&nbsp;&nbsp;Restructuring</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the second quarter of 2001, Cadence announced a worldwide
restructuring plan targeted at reducing workforce and
consolidating facilities and assets.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence recorded $32.7&nbsp;million of restructuring charges
classified as unusual operating expenses associated with the
worldwide restructuring plan. Cadence&#146;s restructuring plan
and associated costs consisted of $11.3&nbsp;million for
reduction in personnel and $21.4&nbsp;million to downsize and
close excess facilities. The restructuring plan was initiated
primarily due to the severe downturn in the economic environment
in the

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<DIV align="left">
electronics industry, particularly in the U.S. The restructuring
was primarily aimed at reducing excess personnel and capacity
costs. Management estimates that the restructuring resulted in
annualized cost reductions of approximately $30.8&nbsp;million
in salary and benefit costs and $35.1&nbsp;million in facility
costs.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The restructuring plan will result in the reduction of
approximately 325 employees. While employee reductions will be
across all business functions, operating units, and geographic
regions, Cadence&#146;s wireless communications-related areas
will be affected more than other areas. In addition, the number
of temporary and contract workers employed by Cadence is being
reduced. Severance costs in the restructuring included severance
benefits, notice pay, and out placement services. Approximately
$5.3&nbsp;million of these costs resulted from the payments to
certain participants in Cadence&#146;s employee stock purchase
plan prior to Tality&#146;s separation from Cadence in October
2000. All terminations and termination benefits were
communicated to the affected employees prior to June&nbsp;30,
2001. All severance benefits are expected to be paid out by the
end of 2001.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Facilities consolidation charges of $21.4&nbsp;million were
incurred in connection with the downsizing and closing of 16
sites. Closure and downsizing costs included payments required
under lease contracts, less any applicable sublease income after
the properties were abandoned, lease buyout costs, restoration
costs associated with certain lease arrangements, and costs to
maintain facilities during the period after abandonment. To
determine the lease loss, which is the loss after Cadence&#146;s
cost recovery efforts from subleasing a building, certain
assumptions were made related to the (1)&nbsp;time period over
which the relevant building would remain vacant,
(2)&nbsp;sublease terms, and (3)&nbsp;sublease rates, including
common area charges. The lease loss is an estimate under
Statement of Financial Accounting Standards No.&nbsp;5
<I>Accounting for Contingencies </I>and represents the low end
of the range, $10.8&nbsp;million, which will be adjusted in the
future upon certain triggering events (change in estimate of
time to sublease, actual sublease rates, etc.). Cadence has
estimated that the high end of the lease loss could be
$50.4&nbsp;million if facilities operating lease rental rates
continue to decrease in the applicable markets or if it takes
longer than expected to find a suitable tenant to sublease the
facility. Asset-related costs that were expensed consisted of
leasehold improvements for facilities that were abandoned and
whose estimated fair market value is zero. As of June&nbsp;30,
2001, two sites had been vacated and four sites had been
downsized.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2001, Cadence recorded $1.5&nbsp;million
of restructuring expenses incurred in connection with its
research and development process.

<P align="left">
<I>&nbsp;&nbsp;&nbsp;Goodwill Write-Off</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In relation to the wireless communications business downsizing
and current decline in business conditions generally, Cadence
restructured certain of its businesses and realigned resources
to focus on profit contribution, high-growth markets, and core
opportunities. As a result, Cadence recorded a charge of
$25.8&nbsp;million related to the impairment of goodwill and
acquired intangibles associated with the acquisition of Diablo
Research Company LLC, or Diablo. Key factors in this write-off
were significant downsizing or reassignment of personnel
directly related to these assets and reduction of future
emphasis on this line of business. The charge was determined as
the amount by which the carrying value of the goodwill and
intangible assets associated with Diablo&#146;s acquisition
exceeded the fair value of those assets.

<P align="left">
<I>&nbsp;&nbsp;&nbsp;Inventory Write-Off and Other</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with its announced restructuring, Cadence recorded
a $5.8&nbsp;million provision expense against inventory. Of the
$5.8&nbsp;million, $3.7&nbsp;million related to two discontinued
product lines as part of Cadence&#146;s restructuring and
$2.1&nbsp;million related to excess inventory of emulation
products. The $3.7&nbsp;million related to inventory and other
related costs for two product lines Cadence will no longer sell.
As part of the restructuring, Cadence examined the business and
determined that these products would not result in future
revenue growth. The excess inventory charge of $2.1&nbsp;million
was due to a sudden and significant decrease in

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forecasted revenue for emulation products and was calculated in
accordance with Cadence&#146;s policy, which is based on
inventory in excess of 12-month demand. Inventory purchases and
commitments are based on future sales forecasts. Cadence
typically buys and builds inventory levels for certain key
components to mitigate component supply constraints. Based on
our current 12-month demand forecast, we do not anticipate that
the excess inventory subject to this provision will be used at a
later date.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Also in connection with its announced restructuring, certain
additional costs will be incurred in order to fulfill Tality
contracts. As a result, a loss provision of $1.1&nbsp;million
has been placed against these contracts.

<P align="left">
<B>&nbsp;&nbsp;&nbsp;</B><I>Tality IPO Related Expense and
Separation Costs</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the three months ended June&nbsp;30, 2001, Cadence recorded
$1.3&nbsp;million of Tality separation costs primarily related
to legal and consulting fees.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the first quarter of 2001, Cadence wrote off
$2.8&nbsp;million of Tality IPO related expense as a result of
the postponement of the Tality IPO on October&nbsp;9, 2000.
These expenses consisted of legal and accounting services and
registration statement printing and filing fees and were
incurred primarily during 2000. In addition, Cadence recorded
$0.7&nbsp;million of Tality separation costs in the first
quarter of 2001, related primarily to information systems
separation.

<P align="left">
<I>&nbsp;&nbsp;&nbsp;Acquisitions and In-Process Technology</I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the three months ended June&nbsp;30, 2001, Cadence acquired
substantially all of the assets of two companies for an
aggregate price of $10.5&nbsp;million, net of acquisition costs,
of which $4.4&nbsp;million was cash and $6.1&nbsp;million was
shares of Cadence common stock, plus future contingent payments.
The acquisitions were accounted for as a purchase. Upon
consummation of the acquisitions, Cadence immediately charged to
expense $1&nbsp;million representing acquired in-process
technology that had not yet reached technological feasibility
and had no alternative future use.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2001, Cadence acquired CadMOS Design Technology,
Inc., a privately held design tools firm headquartered in San
Jose. CadMOS provides solutions to the noise problems
experienced in ultra-deep submicron processes. Its
noise-analysis solutions are targeted at both digital and mixed
signal designers working on microprocessors, dynamic random
access memory, mixed-signal System-on-a-Chip, and
application-specific integrated circuits. Cadence acquired all
of the outstanding stock of CadMOS and assumed all outstanding
stock options and warrants. The purchase price was
$92.7&nbsp;million and the acquisition was accounted for as a
purchase. The purchase price could increase up to an additional
$12.6&nbsp;million, representing up to 488,970 shares, if
certain predetermined performance factors are achieved over the
next three years. Of the $12.6&nbsp;million, $1.7&nbsp;million
is contingent on continued employment. The $12.6&nbsp;million is
based on the share price of Cadence&#146;s common stock at the
time of the acquisition. In connection with the acquisition,
Cadence acquired goodwill of $58.3&nbsp;million, which is being
amortized over 5&nbsp;years, and technology and workforce
intangibles of $12.9&nbsp;million, which are being amortized
over 3 to 5&nbsp;years. The results of operations of CadMOS and
the estimated fair value of the assets acquired and liabilities
assumed are included in Cadence&#146;s consolidated financial
statements from the date of acquisition.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon consummation of the CadMOS acquisition, Cadence immediately
charged to expense $12.1&nbsp;million representing acquired
in-process technology that had not yet reached technological
feasibility and had no alternative future use. The value
assigned to acquired in-process technology was determined by
identifying research projects in areas for which technological
feasibility has not been established. The value was determined
by estimating the costs to develop the acquired in-process
technology into commercially viable products, estimating the
resulting net cash flows from such projects, and discounting the
net cash flows back to their present value. The discount rate
included a factor that took into account the uncertainty
surrounding the successful development of the acquired
in-process technology. The in-process technology is expected to
be commercially viable in 2002. Expenditures to complete the
in-process technology are

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<DIV align="left">
expected to total approximately $1.8&nbsp;million. These
estimates are subject to change, given the uncertainties of the
development process, and no assurance can be given that
deviations from these estimates will not occur. Additionally,
these projects will require additional research and development
after they have reached a state of technological and commercial
feasibility.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the time of its acquisition by Cadence, CadMOS&#146;s
in-process research and development projects were related to the
development of a static timing analysis tool, the development of
advanced fixing capabilities in the noise analysis area, and in
the mixed signal area, the development of a flow to integrate
with Cadence tools and a tool to analyze large
application-specific integrated circuit designs for substrate
noise. The nature of the efforts to complete these projects
related, in varying degrees, to the completion of all planning,
designing, prototyping, verification, and testing activities
necessary to establish that the proposed technologies meet their
design specifications including functional, technical, and
economic performance requirements.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The net cash flows resulting from the projects underway at
CadMOS used to value the purchased research and development were
based on management&#146;s estimates of revenue, cost of
revenue, research and development costs, selling, general and
administrative costs, and income taxes from such projects. The
revenue projections were based on the potential market size that
the projects address, Cadence&#146;s ability to gain market
acceptance in these segments, and the life cycle of this
in-process technology.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Estimated total revenue from the acquired in-process technology
is expected to peak in 2004 and decline rapidly thereafter as
other new products are expected to enter the market. In
addition, a portion of the anticipated revenue had been
attributed to enhancements of the base technology under
development, and has been excluded from net cash flow
calculations. Existing technology was valued at
$3.6&nbsp;million. The net cash flows generated from the
acquired in-process technology were expected to reflect earnings
before interest, taxes, and depreciation of approximately 50% of
the revenue generated from in-process technology. However, there
can be no assurance that these assumptions will prove accurate,
or that Cadence will realize the anticipated benefit of the
acquisition.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The discount of the net cash flows to their present value was
based on the weighted average cost of capital, or WACC. The WACC
calculation produces the average required rate of return of an
investment in an operating enterprise, based on the required
rates of return from investments in various areas of the
enterprise. The rate used to discount the net cash flows from
purchased in-process technology was 28%. The discount rate is
sometimes higher than the WACC due to the inherent uncertainties
in the estimates, including the uncertainty surrounding the
successful development of the acquired in-process technology,
the useful life of such technology, the profitability levels of
such technology, if any, and the uncertainty of technological
advances, all of which were unknown at that time.

<P align="left">
<B>&nbsp;&nbsp;&nbsp;<I>Other Income and Income Taxes</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other income decreased $0.9&nbsp;million and $2.3&nbsp;million
in the three and six months ended June&nbsp;30, 2001,
respectively, when compared to the same periods in 2000,
primarily due to decreases in foreign exchange gains and
interest income, partially offset by an increase in minority
interest income and a reduction in investment losses. The
decrease in interest income was due to a lower average balance
of invested cash and short-term investments and lower interest
rates.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence&#146;s estimated effective tax rate for the three and
six months ended June&nbsp;30, 2001 was 26.5%, excluding the
effect of amortization of acquired intangibles, amortization of
deferred stock compensation, and unusual items. Proceeds from
the Avant! judgement will be subject to U.S. federal and state
taxes. Cadence will provide for taxes on the Avant! proceeds at
a rate of 40%. The effective tax rate for the three and six
months ended July&nbsp;1, 2000 was 26.5%.

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<P align="left">
<B>Liquidity and Capital Resources</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At June&nbsp;30, 2001, Cadence&#146;s principal sources of
liquidity consisted of $141.1&nbsp;million of cash and cash
equivalents and short-term investments, compared to
$137&nbsp;million at December&nbsp;30, 2000, and two syndicated
senior unsecured credit facilities totaling $350&nbsp;million.
As of June&nbsp;30, 2001, Cadence had no outstanding borrowings
under these credit facilities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash provided by operating activities decreased
$6.6&nbsp;million to $81.8&nbsp;million for the six months ended
June&nbsp;30, 2001, when compared to the six months ended
July&nbsp;1, 2000. The decrease was primarily due to the payment
of accounts payable and accrued liabilities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At June&nbsp;30, 2001, Cadence had net working capital of
$59.7&nbsp;million compared with $65.3&nbsp;million at
December&nbsp;30, 2000. The working capital decrease was driven
primarily by a decrease in receivables of $40.4&nbsp;million and
an increase in deferred revenue of $17.3&nbsp;million, partially
offset by a decrease in accounts payable and accrued liabilities
of $29.8&nbsp;million and an increase in prepaid expenses and
other of $15.8&nbsp;million.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to its short-term investments, Cadence&#146;s
primary investing activities consisted of acquisitions,
purchases of property, plant, and equipment, capitalization of
software development costs, and venture capital partnership
investments, which combined represented $97.4&nbsp;million and
$88.2&nbsp;million of cash used for investing activities in the
six months ended June&nbsp;30, 2001 and July&nbsp;1, 2000,
respectively.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence sells put warrants and purchases call options through
private placements. See &#147;Notes to Consolidated Financial
Statements&nbsp;&#151; Put Warrants and Call Options.&#148; At
June&nbsp;30, 2001, Cadence had a maximum potential obligation
related to put warrants to buy back 5.1&nbsp;million shares of
its common stock at an aggregate price of approximately
$128.8&nbsp;million. The put warrants will expire on various
dates through February 2002, and Cadence has the contractual
ability to settle the put warrants prior to their maturity.
Cadence has the ability to settle these put warrants with stock
and, therefore, no amount was classified out of
stockholders&#146; equity in the condensed consolidated balance
sheets.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of its overall investment strategy, Cadence is a limited
partner in a venture capital fund and is committed to invest up
to $100&nbsp;million. As of June&nbsp;30, 2001, Cadence had
contributed approximately $70.5&nbsp;million to this
partnership, which is reflected in other assets in the
accompanying condensed consolidated balance sheets.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;29, 2000, Cadence entered into two syndicated
senior unsecured credit facilities that allow Cadence to borrow
up to $350&nbsp;million, referred to as the 2000 Facilities. The
2000 Facilities replace a prior $355&nbsp;million revolving
credit facility consisting of a $177.5&nbsp;million two-year
revolving credit facility, which was terminated on
September&nbsp;27, 2000, and a $177.5&nbsp;million 364-day
revolving credit facility, which was terminated immediately
prior to consummation of the 2000 Facilities. One of the new
2000 Facilities is a $100&nbsp;million three-year revolving
credit facility, referred to as the Three-Year Facility. The
other new facility is a $250&nbsp;million 364-day revolving
credit facility convertible into a two-year term loan, referred
to as the 364-Day Facility. The Three-Year Facility terminates
on September&nbsp;29, 2003. The 364-Day Facility will terminate
on September&nbsp;28, 2001, at which time the 364-Day Facility
may be converted to a two-year term loan with a maturity date of
September&nbsp;29, 2003, or, at the request of Cadence and with
the consent of members of the bank group that wish to do so, the
termination date of the 364-Day Facility may be extended for one
additional 364-day period with respect to the portion of the
364-Day Facility that a consenting bank holds. For both of the
2000 Facilities, Cadence has the option to pay interest based on
LIBOR plus a spread of between 1.25% and 1.50%, based on a
pricing grid tied to a financial covenant, or the higher of
(i)&nbsp;the Federal Funds Rate plus 0.50% or (ii)&nbsp;the
prime rate. As a result, Cadence&#146;s interest expenses
associated with this borrowing will vary with market rates. In
addition, commitment fees are payable on the unused portion of
the Three-Year Facility at rates between 0.25% and 0.34% based
on a pricing grid tied to a financial covenant and on the unused
portion of the 364-Day Facility at a fixed rate of 0.20%.
Cadence may

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<DIV align="left">
not borrow under the 364-Day Facility at any time that any
portion of the Three-Year Facility remains unused. The 2000
Facilities contain certain financial and other covenants. At
June&nbsp;30, 2001, there were no borrowings outstanding under
the 2000 Facilities.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence anticipates that current cash and short-term investment
balances, cash flows from operations, and its $350&nbsp;million
revolving credit facilities will be sufficient to meet its
working capital and capital requirements on a short-and
long-term basis.

<P align="left">
<B>New Accounting Standards</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2001, the Financial Accounting Standards Board, or
FASB, issued Statement of Financial Accounting Standards, or
SFAS, No.&nbsp;143, &#147;Accounting for Obligations Associated
with the Retirement of Long-Lived Assets.&#148; SFAS
No.&nbsp;143 addresses financial accounting and reporting for
the retirement obligation of an asset. This statement states
that companies should recognize the asset retirement cost, at
their fair value, as part of the cost of the asset and classify
the accrued amount as a liability in the condensed consolidated
balance sheet. The asset retirement liability is then accreted
to the ultimate payout as interest expense. The initial
measurement of the liability would be subsequently updated for
revised estimates of the discounted cash outflows. The Statement
will be effective for fiscal years beginning after June&nbsp;15,
2002. Cadence has not yet determined the effect SFAS
No.&nbsp;143 will have on its consolidated financial position,
results of operations, or cash flows.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2001, the FASB issued SFAS No.&nbsp;141, &#147;Business
Combinations.&#148; SFAS No.&nbsp;141 addresses financial
accounting and reporting for business combinations and it
requires business combinations in the scope of this Statement to
be accounted for using one method, the purchase method. The
provisions of this Statement apply to all business combinations
initiated after June&nbsp;30, 2001. The adoption of this
Statement will not have a material effect of Cadence&#146;s
consolidated financial position, results of operations, or cash
flows.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2001, the FASB issued SFAS No.&nbsp;142, &#147;Goodwill
and Other Intangible Assets.&#148; SFAS No.&nbsp;142 addresses
financial accounting and reporting for acquired goodwill and
other acquired assets. It addresses how intangible assets that
are acquired individually or with a group of other assets (but
not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition.
This Statement also addresses how goodwill and other intangible
assets should be accounted for after they have been initially
recognized in the financial statements. With the adoption of
this Statement, goodwill is no longer subject to amortization
over its estimated useful life. Goodwill will be assessed for
impairment each year using the fair-value-based test. This
Statement becomes effective January&nbsp;1, 2002. Cadence is
currently assessing the impact of the discontinued amortization
of goodwill and, while Cadence is not aware of any impairment
charges, an analysis will have to be done upon adoption of this
Statement to determine if an impairment charge is necessary.
Cadence has not yet determined the effect SFAS No.&nbsp;142 will
have on its consolidated financial position, results of
operations, or cash flows.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September 2000, the Emerging Issues Task Force, or EITF,
published their consensus on EITF Issue No.&nbsp;00-19,
&#147;Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Company&#146;s Own
Stock,&#148; which was taken up to address implementation of the
EITF&#146;s March 2000 final consensus of EITF Issue
No.&nbsp;00-7, &#147;Application of EITF Issue No.&nbsp;96-13 to
Equity Derivative Instruments That Contain Certain Provisions
That Require Net Cash Settlement If Certain Events Outside the
Control of the Issuer Occur.&#148; The final consensus in Issue
No.&nbsp;00-7 generally stated that equity derivative contracts
that contain provisions that implicitly or explicitly require
net cash settlement outside of the control of the company must
be treated as assets and liabilities and carried at fair value
with changes in fair value recognized in earnings rather than
equity instruments carried at original cost and reported as part
of permanent equity. This interpretation became effective
June&nbsp;30, 2001 and did not have a material effect on
Cadence&#146;s consolidated financial position, results of
operations, or cash flows.

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<P align="left">
<B>Factors That May Affect Future Results</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following risk factors and other information included in
this Quarterly Report on Form&nbsp;10-Q should be carefully
considered. The risks and uncertainties described below are not
the only ones Cadence faces. Additional risks and uncertainties
not currently known to Cadence or that Cadence currently deem
immaterial also may impair Cadence&#146;s business operations.
If any of the following risks actually occur, Cadence&#146;s
business, operating results, and financial condition could be
materially harmed. Unless specifically noted, references to
Cadence in the discussion below are references to Cadence and
its subsidiaries, including Tality Corporation and its
subsidiaries.

<P align="left">
<B><I>Cadence is subject to the cyclical nature of the
integrated circuit industry and the electronics systems</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>industry, and the current downturn or any future downturns
	may reduce our revenue</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Purchases of our products and services are highly dependent upon
the commencement of new design projects by integrated circuit
manufacturers and electronics systems companies. The integrated
circuit industry is highly cyclical and is characterized by
constant and rapid technological change, rapid product
obsolescence and price erosion, evolving standards, short
product life cycles, and wide fluctuations in product supply and
demand. The integrated circuit and electronics systems
industries have experienced significant downturns, often
connected with, or in anticipation of, maturing product cycles
of both these companies&#146; and their customers&#146; products
and a decline in general economic conditions. These downturns
have been characterized by diminished product demand, production
over capacity, high inventory levels and accelerated erosion of
average selling prices. During these downturns, the number of
new design projects may decrease. A number of integrated circuit
manufacturers and electronics systems companies have announced
significant slowdowns of demand and production. Cadence expects
continued weakness in the communications businesses of the
electronics systems industry for the foreseeable future. The
current slowdown and any future downturns may reduce our revenue
and harm our results of operations.

<P align="left">
<B><I>Cadence has reorganized its design services group as a
separate company, which may impact its financial results</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since 1995, Cadence has operated an electronics design services
group. On July&nbsp;17, 2000, Cadence announced its plan to
separate its design services group into a separate company named
Tality Corporation focused on providing design solutions and
proprietary technology to electronics product companies and
integrated circuit manufacturers, and announced the planned
initial public offering of the separate company. The separation
was substantially completed on October&nbsp;4, 2000. On
October&nbsp;9, 2000, Cadence announced that it had postponed
Tality&#146;s initial public offering due to unfavorable market
conditions. On April&nbsp;17, 2001, Tality withdrew the
registration statement for its initial public offering. Cadence
currently intends to consider undertaking an initial public
offering for Tality when market conditions become favorable. As
a result of a reorganization of the Tality entities during the
end of the second quarter and beginning of the third quarter,
Tality now operates as an indirect wholly-owned subsidiary of
Cadence. Cadence&#146;s expenses in the design services business
increased in connection with Tality&#146;s separation from
Cadence and Tality&#146;s reorganization, and its expenses may
continue to increase. The rate of growth of Tality&#146;s
revenue over prior periods has declined in 2001, and may not
increase in the near term, or at all, and its separation and
reorganization may prove more expensive than Cadence
anticipates. If Tality fails to increase its revenue to offset
its expenses, Tality will continue to experience losses.

<P align="left">
<B><I>Cadence has agreed to grant certain rights and provide
certain services to Tality on terms that are more</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>favorable to Tality than terms that would be offered to an
	unrelated party</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the separation of Tality, Cadence entered
into a number of agreements governing its business relationships
with Tality and Cadence&#146;s provision of certain services to
Tality, including provision of certain facilities, and
accounting, finance, legal, human resources, and other
administrative services, on

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<DIV align="left">
terms that are more favorable to Tality than terms that would be
offered to an unrelated entity. As a result, Cadence is
obligated to provide certain services to Tality for the periods
defined in the various agreements, some of which have long or
unspecified terms. Continued provision of such services after
Tality&#146;s separation and after a potential future initial
public offering may impact our financial results.
</DIV>

<P align="left">
<B><I>Cadence has historically suffered losses in its
electronics design and methodology services business and
may</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>continue to do so in the future</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The market for electronics design and methodology services is
relatively new and rapidly evolving. Cadence&#146;s or
Tality&#146;s failure to succeed in these electronics design and
methodology services businesses may seriously harm
Cadence&#146;s business, operating results, and financial
condition.

<P align="left">
<B><I>The success of Cadence&#146;s electronic design and
methodology services businesses depend on many factors
that</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>are beyond its control</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to be successful with its electronics design and
methodology services, Cadence must overcome several factors that
are beyond its control, including the following:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	<I>Cadence&#146;s cost of services personnel is high and reduces
	gross margin. </I>Gross margin represents the difference between
	the amount of revenue from the sale of services and
	Cadence&#146;s cost of providing those services. Cadence must
	pay high salaries to attract and retain professional services
	personnel. This results in a lower gross margin than the gross
	margin in Cadence&#146;s software business. In addition, the
	high cost of training new services personnel or not fully
	utilizing these personnel can significantly lower gross margin.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	<I>A substantial portion of these services contracts are
	fixed-price contracts. </I>This means that the customer pays a
	fixed price that is agreed upon at the time of contract
	execution, regardless of how much time or how many resources
	Cadence must actually devote to successfully complete the
	contract. Although Cadence is moving towards more time based
	contracts, there can be no guarantee that this shift will occur.
	If Cadence&#146;s cost in performing the services consistently
	and significantly exceeds the amount the customer has agreed to
	pay, it could seriously harm Cadence&#146;s business, operating
	results, and financial condition.</TD>
</TR>

</TABLE>

<P align="left">
<B><I>Cadence&#146;s failure to respond quickly to technological
developments could make its products uncompetitive</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>and obsolete</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The industries in which Cadence competes experience rapid
technology developments, changes in industry standards, changes
in customer requirements and frequent new product introductions
and improvements. Currently, the electronics design industry is
experiencing several revolutionary trends:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The size of features such as wires, transistors, and contacts on
	chips is shrinking due to advances in semiconductor
	manufacturing processes. Process feature sizes refer to the
	width of the transistors and the width and spacing of the
	interconnect on the chip. Feature size is normally identified by
	the headline transistor length, which is shrinking from 0.35
	microns to 0.18 microns and smaller. This is commonly referred
	to in the semiconductor industry as the migration to deep
	submicron and it represents a major challenge for all levels of
	the semiconductor industry from chip design and design
	automation to design of manufacturing equipment and the
	manufacturing process itself. Shrinkage of transistor length to
	such infinitesimal proportions (for reference, the diameter of
	the period at the end of this sentence is approximately 400
	microns) is challenging fundamental laws of physics and
	chemistry.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The ability to design very large chips, in particular
	integration of entire electronic systems onto a single chip
	instead of a circuit board (a process that is referred to in the
	industry as &#147;system-on-a-chip&#148;), increases the
	complexity of managing a design that at the lowest level is</TD>
</TR>

</TABLE>

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<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD></TD>
	<TD align="left">
	represented by billions of shapes on the fabrication mask. In
	addition, systems typically incorporate microprocessors and
	digital signal processors that are programmed with software,
	requiring simultaneous design of the silicon chip and the
	related embedded software on the chip.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Cadence is unable to respond quickly and successfully to
these developments and changes, Cadence may lose its competitive
position and its products or technologies may become
uncompetitive or obsolete. In order to compete successfully,
Cadence must develop or acquire new products and improve its
existing products and processes on a schedule that keeps pace
with technological developments in its industries. Cadence must
also be able to support a range of changing computer software,
hardware platforms and customer preferences. There is no
guarantee that Cadence will be successful in this regard.

<P align="left">
<B><I>Cadence&#146;s failure to obtain software or other
intellectual property licenses or adequately protect its</I></B>

<DIV align="left">
<B><I>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;proprietary
 rights could seriously harm its business</I></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence&#146;s success depends, in part, upon its proprietary
technology. Many of Cadence&#146;s products include software or
other intellectual property licensed from third parties, and
Cadence may have to seek new or renew existing licenses for this
software and other intellectual property in the future.
Cadence&#146;s design services business also requires it to
license software or other intellectual property from third
parties. Cadence&#146;s failure to obtain for its use software
or other intellectual property licenses or other intellectual
property rights on favorable terms, or the need to engage in
litigation over these licenses or rights, could seriously harm
Cadence&#146;s business, operating results, and financial
condition.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Also, Cadence generally relies on patents, copyrights,
trademarks and trade secret laws to establish and protect its
proprietary rights in technology and products. Despite
precautions Cadence may take to protect its intellectual
property, Cadence cannot assure you that third parties will not
try to challenge, invalidate, or circumvent these patents.
Cadence also cannot assure you that the rights granted under its
patents will provide it with any competitive advantages, patents
will be issued on any of its pending applications, or future
patents will be sufficiently broad to protect Cadence&#146;s
technology. Furthermore, the laws of foreign countries may not
protect Cadence&#146;s proprietary rights in those countries to
the same extent as U.S. law protects these rights in the United
States.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence cannot assure you that its reliance on licenses from or
to third parties, or that patent, copyright, trademark, and
trade secret protections, will be enough to be successful and
profitable in the industries in which Cadence competes.

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="1%"></TD>
	<TD width="99%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD>
	<B><I>Intellectual property infringement by or against Cadence
	could seriously harm its business</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are numerous patents in the electronics design automation,
or EDA, industry and new patents are being issued at a rapid
rate. It is not always economically practicable to determine in
advance whether a product or any of its components infringes the
patent rights of others. As a result, from time to time, Cadence
may be forced to respond to or prosecute intellectual property
infringement claims to protect its rights or defend a
customer&#146;s rights. These claims, regardless of merit, could
consume valuable management time, result in costly litigation,
or cause product shipment delays, all of which could seriously
harm Cadence&#146;s business, operating results, and financial
condition. In settling these claims, Cadence may be required to
enter into royalty or licensing agreements with the third
parties claiming infringement. These royalty or licensing
agreements, if available, may not have terms acceptable to
Cadence. Being forced to enter into a license agreement with
unfavorable terms could seriously harm Cadence&#146;s business,
operating results, and financial condition. Any potential
intellectual property litigation could force us to do one or
more of the following:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Pay damages to the party claiming infringement;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Stop licensing, or providing services that use, the challenged
	intellectual property;</TD>
</TR>

</TABLE>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Obtain a license from the owner of the infringed intellectual
	property to sell or technology, which license may use the
	relevant not be available on reasonable terms, or at all; or</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Redesign the challenged technology, which could be
	time-consuming and costly.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we were forced to take any of these actions, our business and
results of operations may be harmed.

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="1%"></TD>
	<TD width="99%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD>
	<B><I>Cadence obtains key components for its hardware products
	from a limited number of suppliers</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence depends on several suppliers for certain key components
and board assemblies used in its hardware-based verification
products. Cadence&#146;s inability to develop alternative
sources or to obtain sufficient quantities of these components
or board assemblies could result in delays or reductions in
product shipments. In particular, Cadence currently relies on
Taiwan Semiconductor Manufacturing Corporation for the supply of
key integrated circuits and on IBM for the hardware components
for Cadence&#146;s COBALT&#153; and MERCURYPLUS&#153; products.
Other disruptions in supply may also occur. If there were such a
reduction or interruption, Cadence&#146;s results of operations
would be seriously harmed. Even if Cadence can eventually obtain
these components from alternative sources, a significant delay
in Cadence&#146;s ability to deliver products would result.

<P align="left">
<B><I>Fluctuations in quarterly results of operations could hurt
Cadence&#146;s business and the market price of its stock</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence has experienced, and may continue to experience, varied
quarterly operating results. Various factors affect
Cadence&#146;s quarterly operating results and some of them are
not within Cadence&#146;s control, including the mix of products
and services sold, the mix of licenses used to sell products and
the timing of significant orders for its software products and
services by customers. Quarterly operating results are affected
by the mix of products and services sold because there are
significant differences in margins from the sale of hardware and
software products and services. For example, based on a
three-year average through 2000, Cadence had realized gross
margins on software product sales of approximately 90% but
realized gross margins of approximately 67% on hardware product
sales and approximately 33% on its performance of services. In
the second quarter of 2001, realized gross margins increased to
approximately 92% for software products, decreased to
approximately 60% for hardware products, and increased to
approximately 34% for services. In addition, Cadence&#146;s
quarterly operating results are affected by the mix of licenses
entered into in connection with the sale of software products.
Cadence has three basic licensing models: perpetual, fixed-term,
and subscription. Perpetual and fixed-term licenses recognize a
larger portion of the revenue at the beginning of the license
period and subscription licenses recognize revenue ratably over
each quarter of the term of the license. As Cadence customers
purchase more software products pursuant to subscription
agreements, future operating results may be lower than that of
comparable quarters in which perpetual and fixed-term licenses
were in greater use for software product transactions. Finally,
Cadence&#146;s quarterly operating results are affected by the
timing of significant orders for its software products because a
significant number of contracts for software products are in
excess of $5 million. The failure to close a contract for the
sale of one or more orders of Cadence&#146;s software products
could seriously harm its quarterly operating results.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales of Cadence&#146;s hardware products depend, in significant
part, upon the decision of the prospective customer to commence
a project for the design and development of complex computer
chips and systems. These projects often require significant
commitments of time and capital. Cadence&#146;s hardware sales
may be delayed if customers delay commencement of projects.
Cadence has experienced greater delays during 2001 than in the
past and such increase in delays may continue. Lengthy hardware
sales cycles subject Cadence to a number of significant risks
over which Cadence has little or no control, including
insufficient, excess or obsolescent inventory, variations in
inventory valuation and fluctuations in quarterly operating
results.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, Cadence bases its expense budgets partially on its
expectations of future revenue. However, it is difficult to
predict revenue levels or growth. Revenue levels that are below
Cadence&#146;s expectations could seriously hurt Cadence&#146;s
business, operating results, and financial condition. If revenue
or

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<DIV align="left">
operating results fall short of the levels expected by public
market analysts and investors, the trading price of Cadence
common stock could decline dramatically. Also, because of the
timing of large orders and its customers&#146; buying patterns,
Cadence may not learn of revenue shortfalls, earnings shortfalls
or other failures to meet market expectations until late in a
fiscal quarter, which could cause even more immediate and
serious harm to the trading price of Cadence common stock.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence believes that quarter-to-quarter comparisons of the
results of operations of its services business segments may not
be meaningful. Therefore, stockholders should not view
Cadence&#146;s historical results of operations as reliable
indicators of its future performance. In addition, many of our
services engagements are terminable with little or no advance
notice and without penalty. Since a significant portion of our
costs is fixed, we may not be able to reduce our costs in a
timely manner in connection with the unanticipated revenue loss
when one or more projects is terminated.

<P align="left">
<B><I>The lengthy sales cycle of Cadence&#146;s products and
services makes the timing of its revenue difficult to
predict</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>and may cause its operating results to fluctuate
	unexpectedly</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence has a lengthy sales cycle that generally extends at
least three to six months. The length of our sales cycle may
cause our revenue and operating results to vary unexpectedly
from quarter to quarter. The complexity and expense associated
with our business generally requires a lengthy customer
education and approval process. Consequently, we may incur
substantial expenses and devote significant management effort
and expense to develop potential relationships that do not
result in agreements or revenue and may prevent us from pursuing
other opportunities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, sales of our products and services may be delayed
if customers delay approval or commencement of projects because
of:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Customers&#146; budgetary constraints and internal acceptance
	review procedures;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The timing of customers&#146; budget cycles; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The timing of customers&#146; competitive evaluation processes.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If customers experience delays in their approval or project
commencement activities, we may not learn of, and therefore
would not be able to communicate to the public, revenue or
earnings shortfalls until late in a fiscal quarter.

<P align="left">
<B><I>Cadence has recently completed acquisitions, expects to
acquire other companies or businesses, and may not</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>successfully integrate them</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence has acquired other businesses before and is likely to do
so again. While Cadence expects to analyze carefully all
potential transactions before committing to them, Cadence cannot
assure you that any transaction that is completed will result in
long-term benefits to Cadence or its stockholders, or that
Cadence&#146;s management will be able to manage the acquired
businesses effectively. In addition, growth through acquisition
involves a number of risks. If any of the following events
occurs after Cadence acquires another business, it could
seriously harm Cadence&#146;s business, operating results, and
financial condition:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Difficulties in combining previously separate businesses into a
	single unit;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The substantial diversion of management&#146;s attention from
	day-to-day business when negotiating these transactions and then
	integrating an acquired business;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The discovery after the acquisition has been completed of
	liabilities assumed from the acquired business;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The failure to realize anticipated benefits such as cost savings
	and revenue enhancements;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The failure to retain key personnel of the acquired business;</TD>
</TR>

</TABLE>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Difficulties related to assimilating the products of an acquired
	business in, for example, distribution, engineering, and
	customer support areas;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Unanticipated costs;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Adverse effects on existing relationships with suppliers and
	customers; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Failure to understand and compete effectively in markets in
	which we have limited previous experience.</TD>
</TR>

</TABLE>

<P align="left">
<B><I>Cadence&#146;s international operations may seriously harm
its financial condition because of several weak foreign</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>economies and the effect of foreign exchange rate
	fluctuations</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence has significant operations outside the United States.
Cadence&#146;s revenue from international operations as a
percentage of total revenue was approximately 46% for the three
months ended June&nbsp;30, 2001 and July&nbsp;1, 2000.
Cadence&#146;s revenue from international operations as a
percentage of total revenue was approximately 42% and 44% for
the six months ended June&nbsp;30, 2001 and July&nbsp;1, 2000,
respectively. Cadence also transacts business in various foreign
currencies. Fluctuations in the rate of exchange between the
U.S. dollar and the currencies of countries other than the
United States in which Cadence conducts business could seriously
harm its business, operating results, and financial condition.
For example, if there is an increase in the rate at which a
foreign currency exchanges into U.S. dollars, it will take more
of the foreign currency to equal a specified amount of U.S.
dollars than before the rate increase. If Cadence prices its
products and services in the foreign currency, it will receive
less in U.S. dollars than it did before the rate increase went
into effect. If Cadence prices its products and services in U.S.
dollars, an increase in the exchange rate will result in an
increase in the price for Cadence&#146;s products and services
compared to those products of its competitors that are priced in
local currency. This could result in Cadence&#146;s prices being
uncompetitive in markets where business is transacted in the
local currency. Cadence&#146;s international operations may also
be subject to other risks, including:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The adoption and expansion of government trade restrictions;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Volatile foreign exchange rates and currency conversion risks;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Limitations on repatriation of earnings;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Reduced protection of intellectual property rights in some
	countries;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Recessions in foreign economies;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Longer receivables collection periods and greater difficulty in
	collecting accounts receivable;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Difficulties in managing foreign operations;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Political and economic instability;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Unexpected changes in regulatory requirements;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Tariffs and other trade barriers; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	U.S. government licensing requirements for export which make
	licenses difficult to obtain.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence expects that revenue from its international operations
will continue to account for a significant portion of its total
revenue.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Exposure to foreign currency transaction risk can arise when
transactions are conducted in a currency different from the
functional currency of a Cadence subsidiary. A subsidiary&#146;s
functional currency is the currency in which it primarily
conducts its operations, including product pricing, expenses and
borrowings. Cadence uses foreign currency forward exchange
contracts and purchases foreign currency put options to help
protect against currency exchange risks. These forward contracts
and put options allow Cadence to buy

<P align="center"><FONT size="2">35
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<DIV align="left">
or sell specific foreign currencies at specific prices on
specific dates. Increases or decreases in the value of
Cadence&#146;s foreign currency transactions are partially
offset by gains and losses on these forward contracts and put
options. Although Cadence attempts to reduce the impact of
foreign currency fluctuations, significant exchange rate
movements may hurt Cadence&#146;s results of operations as
expressed in U.S. dollars.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Foreign currency exchange risk occurs for some of Cadence&#146;s
foreign operations whose functional currency is the local
currency. The primary effect of foreign currency translation on
Cadence&#146;s results of operations is a reduction in revenue
from a strengthening U.S. dollar, offset by a smaller reduction
in expenses. Exchange rate gains and losses on the translation
into U.S. dollars of amounts denominated in foreign currencies
are included as a separate component of stockholders&#146;
equity.

<P align="left">
<B><I>Failure to obtain export licenses could harm
Cadence&#146;s business</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence must comply with U.S. Department of Commerce regulations
in shipping its software products and other technologies outside
the U.S. Although Cadence has not had any significant difficulty
complying with these regulations so far, any significant future
difficulty in complying could harm Cadence&#146;s business,
operating results, and financial condition.

<P align="left">
<B><I>Cadence&#146;s inability to compete in its industries
could seriously harm its business</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The EDA market and the commercial electronics design and
methodology services industries are highly competitive. If
Cadence is unable to compete successfully in these industries,
it could seriously harm Cadence&#146;s business, operating
results, and financial condition. To compete in these
industries, Cadence must identify and develop innovative and
cost competitive electronic design automation software products
and market them in a timely manner. It must also gain industry
acceptance for its design and methodology services and offer
better strategic concepts, technical solutions, prices and
response time, or a combination of these factors, than those of
other design companies and the internal design departments of
electronics manufacturers. Cadence cannot assure you that it
will be able to compete successfully in these industries.
Factors that could affect Cadence&#146;s ability to succeed
include:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The development of competitive EDA products and design and
	methodology services could result in a shift of customer
	preferences away from Cadence&#146;s products and services and
	significantly decrease revenue;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The electronics design and methodology services industries are
	relatively new and electronics design companies and
	manufacturers are only beginning to purchase these services from
	outside vendors;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	The pace of the technology change demands continuous
	technological development to meet the requirements of
	next-generation design challenges; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	There are a significant number of current and potential
	competitors in the EDA industry and the cost of entry is low.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the EDA products industry, Cadence currently competes with
three large companies, Avant! Corporation, Mentor Graphics
Corporation, and Synopsys, Inc., and numerous smaller companies.
Cadence also competes with manufacturers of electronic devices
that have developed or have the capability to develop their own
EDA products. Many manufacturers of electronic devices may be
reluctant to purchase services from independent vendors such as
Cadence because they wish to promote their own internal design
departments. In the electronics design and methodology services
industries, Cadence competes with numerous electronic design and
consulting companies as well as with the internal design
capabilities of electronics manufacturers. Other electronics
companies and management consulting firms continue to enter the
electronic design and methodology services industries.

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<P align="left">
<B><I>Cadence&#146;s failure to attract, train, motivate, and
retain key employees may harm its business</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Competition for highly skilled employees is very intense.
Cadence&#146;s business depends on the efforts and abilities of
its senior management, its research and development staff, and a
number of other key management, sales, support, technical, and
services personnel. The high cost of training new personnel, not
fully utilizing these personnel, or losing trained personnel to
competing employers could reduce our gross margins and harm our
business and operating results. Competition for these personnel
is intense, particularly in geographic areas recognized as high
technology centers such as the Silicon Valley area, where our
principal offices are located, and the other locations where we
maintain facilities. To attract and retain individuals with the
requisite expertise, we may be required to grant large numbers
of stock options or other stock-based incentive awards, which
may be dilutive to existing stockholders. We may also be
required to pay significant base salaries and cash bonuses,
which could harm our operating results. If we do not succeed in
hiring and retaining candidates with appropriate qualifications,
we will not be able to grow our business and our operating
results will suffer. Cadence&#146;s failure to attract, train,
motivate, and retain key employees would impair its development
of new products, its ability to provide design and methodology
services and the management of its businesses. This would
seriously harm Cadence&#146;s business, operating results, and
financial condition.

<P align="left">
<B><I>If Cadence becomes subject to unfair hiring claims,
Cadence could be prevented from hiring needed</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>personnel, incur liability for damages and incur
	substantial costs in defending itself</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Companies in Cadence&#146;s industry whose employees accept
positions with competitors frequently claim that these
competitors have engaged in unfair hiring practices or that the
employment of these persons would involve the disclosure or use
of trade secrets. These claims could prevent us from hiring
personnel or cause us to incur liability for damages. Cadence
could also incur substantial costs in defending itself or its
employees against these claims, regardless of their merits.
Defending Cadence from these claims could also divert the
attention of Cadence&#146;s management away from its operations.

<P align="left">
<B><I>Errors or defects in Cadence designs could expose it to
liability and harm our reputation</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence&#146;s customers use its products and services in
designing and developing products that involve a high degree of
technological complexity, each of which has its own
specifications and is based on various industry standards.
Because of the complexity of the systems and products with which
Cadence works, some of its products and designs can be
adequately tested only when put to full use in the marketplace.
As a result, its customers or their end users may discover
errors or defects in Cadence&#146;s software or the systems
Cadence designs, or the products or systems incorporating its
design and intellectual property may not operate as expected.
Errors or defects could result in:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Loss of current customers and loss of, or delay in, revenue and
	loss of market share;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Failure to attract new customers or achieve market acceptance;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Diversion of development resources to resolving the problem;</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Increased service costs; and</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Liability for damages.</TD>
</TR>

</TABLE>

<P align="left">
<B><I>We rely on a continuous power supply to conduct our
operations, and California&#146;s current energy crisis
could</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>disrupt our operations and increase our expenses</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
California is in the midst of an energy crisis that could
disrupt our operations and increase our expenses. In the event
of an acute power shortage, that is, when power reserves for the
State of California fall below 1.5%, California has on some
occasions implemented, and may in the future continue to
implement, rolling blackouts throughout California. We currently
have backup generators or alternate sources of power

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</FONT>

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<DIV align="left">
for critical operations in the event of a blackout. If, however,
blackouts interrupt our power supply, or the power supply of our
service providers, we may be temporarily unable to continue
operations at our facilities. Any such interruption in our
ability to continue operations at our facilities could damage
our reputation, harm our ability to retain existing customers
and to obtain new customers, and could result in lost revenue,
any of which could substantially harm our business and results
of operations. Our current insurance does not provide coverage
for any damages we or our customers may suffer as a result of
any interruption in our power supply.
</DIV>

<P align="left">
<B><I>Anti-takeover defenses in Cadence&#146;s charter, by-laws,
and under Delaware law could prevent an acquisition</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>of Cadence or limit the price that investors might be
	willing to pay for Cadence common stock</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provisions of the Delaware General Corporation Law that apply to
Cadence and its Certificate of Incorporation could make it
difficult for another company to acquire control of Cadence. For
example:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Section&nbsp;203 of the Delaware General Corporation Law
	generally prohibits a Delaware corporation from engaging in any
	business combination with a person owning 15% or more of its
	voting stock, or who is affiliated with the corporation and
	owned 15% or more of its voting stock at any time within three
	years prior to the proposed business combination, for a period
	of three years from the date the person became a 15% owner,
	unless specified conditions are met.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Cadence&#146;s Certificate of Incorporation allows
	Cadence&#146;s Board of Directors to issue, at any time and
	without stockholder approval, preferred stock with such terms as
	it may determine. No shares of preferred stock are currently
	outstanding. However, the rights of holders of any Cadence
	preferred stock that may be issued in the future may be superior
	to the rights of holders of its common stock.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Cadence has a rights plan, commonly known as a &#147;poison
	pill,&#148; which would make it difficult for someone to acquire
	Cadence without the approval of Cadence&#146;s Board of
	Directors.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All or any one of these factors could limit the price that
certain investors would be willing to pay for shares of Cadence
common stock and could delay, prevent or allow Cadence&#146;s
Board of Directors to resist an acquisition of Cadence, even if
the proposed transaction was favored by a majority of
Cadence&#146;s independent stockholders.

<P align="left">
<B><I>Cadence&#146;s inability to deal effectively with the
conversion to the euro may negatively impact its
marketing</I></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="94%"></TD>
</TR>

<TR valign="top">
	<TD></TD>
	<TD align="left">
	<B><I>and pricing strategies</I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;1, 1999, 11&nbsp;member countries of the
European Union adopted the euro as their common legal currency
and established fixed conversion rates between their sovereign
currencies and the euro. Transactions can be made in either the
sovereign currencies or the euro until January&nbsp;1, 2002,
when the euro must be used exclusively. Currently, only
electronic transactions may be conducted using the euro. Cadence
is in the process of upgrading its internal systems and believes
that its financial institution vendors are capable of handling
the euro conversion and Cadence is in the process of examining
current marketing and pricing policies and strategies that may
be affected by conversion to the euro. The cost of this effort
is not expected to materially harm Cadence&#146;s results of
operations or financial condition. However, Cadence cannot
assure you that all issues related to the euro conversion have
been identified and that any additional issues would not
materially harm Cadence&#146;s results of operations or
financial condition. For example, the conversion to the euro may
have competitive implications on Cadence&#146;s pricing and
marketing strategies and Cadence may be at risk to the extent
its principal European suppliers and customers are unable to
deal effectively with the impact of the euro conversion. Cadence
has not yet completed its evaluation of the impact of the euro
conversion on its functional currency designations.

<P align="center"><FONT size="2">38
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<!-- link2 "Item 3.Quantitative and Qualitative Disclosures About Market Risk" -->
<DIV align="left"><A NAME="008"></A></DIV>

<P align="left">
<B>
Item&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Quantitative
 and Qualitative Disclosures About Market Risk</B>

<P align="left">
<B>Disclosures about Market Risk</B>

<P align="left">
<B>&nbsp;&nbsp;&nbsp;<I>Interest Rate Risk</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence&#146;s exposure to market risk for changes in interest
rates relates primarily to its investment portfolio and
long-term debt obligations. While Cadence is exposed with
respect to interest rate fluctuations in many of the
world&#146;s leading industrialized countries, Cadence&#146;s
interest income and expense is most sensitive to fluctuations in
the general level of U.S. interest rates. In this regard,
changes in U.S. interest rates affect the interest earned on
Cadence&#146;s cash and cash equivalents, short-term and
long-term investments, and interest paid on its long-term debt
obligations as well as costs associated with foreign currency
hedges.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence invests in high quality credit issuers and, by policy,
limits the amount of its credit exposure to any one issuer. As
stated in its policy, Cadence&#146;s first priority is to reduce
the risk of principal loss. Consequently, Cadence seeks to
preserve its invested funds by limiting default risk, market
risk, and reinvestment risk. Cadence mitigates default risk by
investing in only high quality credit securities that it
believes to be low risk and by positioning its portfolio to
respond appropriately to a significant reduction in a credit
rating of any investment issuer or guarantor. The portfolio
includes only marketable securities with active secondary or
resale markets to ensure portfolio liquidity.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;29, 2000, Cadence entered into two syndicated
senior unsecured credit facilities that allow Cadence to borrow
up to $350&nbsp;million, referred to as the 2000 Facilities. The
2000 Facilities replace a prior $355 million revolving credit
facility consisting of a $177.5&nbsp;million two-year revolving
credit facility, which was terminated on September&nbsp;27,
2000, and a $177.5&nbsp;million 364-day revolving credit
facility, which was terminated immediately prior to consummation
of the 2000 Facilities. One of the new 2000 Facilities is a
$100&nbsp;million three-year revolving credit facility, referred
to as the Three-Year Facility. The other new facility is a
$250&nbsp;million 364-day revolving credit facility convertible
into a two-year term loan, referred to as the 364-Day Facility.
The Three-Year Facility terminates on September&nbsp;29, 2003.
The 364-Day Facility will terminate on September&nbsp;28, 2001,
at which time the 364-Day Facility may be converted to a
two-year term loan with a maturity date of September&nbsp;29,
2003, or, at the request of Cadence and with the consent of
members of the bank group that wish to do so, the termination
date of the 364-Day Facility may be extended for one additional
364-day period with respect to the portion of the 364-Day
Facility that a consenting bank holds. For both of the 2000
Facilities, Cadence has the option to pay interest based on
LIBOR plus a spread of between 1.25% and 1.50%, based on a
pricing grid tied to a financial covenant, or the higher of
(i)&nbsp;the Federal Funds Rate plus 0.50% or (ii)&nbsp;the
prime rate. As a result, Cadence&#146;s interest expenses
associated with this borrowing will vary with market rates. In
addition, commitment fees are payable on the unused portion of
the Three-Year Facility at rates between 0.25% and 0.34% based
on a pricing grid tied to a financial covenant and on the unused
portion of the 364-Day Facility at a fixed rate of 0.20%.
Cadence may not borrow under the 364-Day Facility at any time
that any portion of the Three-Year Facility remains unused. The
2000 Facilities contain certain financial and other covenants.
At June&nbsp;30, 2001, there were no borrowings outstanding
under the 2000 Facilities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below presents the carrying value and related weighted
average interest rates for Cadence&#146;s interest bearing
instruments. All highly liquid investments with an original
maturity of three months or less at the date of purchase are
considered to be cash equivalents; investments with original
maturities between three and 12&nbsp;months are considered to be
short-term investments. Investments with original maturities
greater than 12&nbsp;months are considered long-term
investments. As of June&nbsp;30, 2001, all of Cadence&#146;s

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<DIV align="left">
investments have maturities of less than 12&nbsp;months. The
carrying value approximated fair value at June&nbsp;30, 2001.
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Carrying</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Interest Rate</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">(In millions)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="3" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Interest Bearing Instruments:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash&nbsp;&#151; variable rate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">54.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.80%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash&nbsp;&#151; fixed rate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">16.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.05%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Short-term investments&nbsp;&#151; fixed rate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.94%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Cash equivalents&nbsp;&#151; variable rate
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.38%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Total interest bearing instruments
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">82.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.67%</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B>&nbsp;&nbsp;&nbsp;<I>Interest Rate Swap Risk</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 1998, Cadence entered into a 4.8% fixed interest
rate-swap in connection with its accounts receivable financing
program to modify the interest rate characteristics of the
receivables sold to a financing institution on a non-recourse
basis. As of June&nbsp;30, 2001, the notional amount payable was
$4.3&nbsp;million that will be amortized in quarterly
installments of approximately $2.2&nbsp;million through October
2001. The estimated fair value at June&nbsp;30, 2001 was
negligible.

<P align="left">
<B>&nbsp;&nbsp;&nbsp;<I>Foreign Currency Risk</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence&#146;s operations include transactions in foreign
currencies and, as such, Cadence benefits from a weaker dollar
and is adversely affected by a stronger dollar relative to major
currencies worldwide. Accordingly, the primary effect of foreign
currency transactions on Cadence&#146;s results of operations is
a reduction in revenue from a strengthening U.S. dollar, offset
by a smaller reduction in expenses.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence enters into foreign currency forward exchange contracts
and purchases foreign currency put options with financial
institutions primarily to protect against currency exchange
risks associated with existing assets and liabilities and
probable but not firmly committed transactions, respectively.
Forward contracts are not accounted for as hedges and,
therefore, the unrealized gains and losses are recognized in
other income, net in advance of the actual foreign currency cash
flows with the fair value of these forward contracts being
recorded as accrued liabilities.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence purchases put options to hedge the currency exchange
risks associated with probable but not firmly committed
transactions. Probable but not firmly committed transactions
consist of revenue from Cadence&#146;s products and maintenance
contracts in a currency other than the functional currency.
These transactions are made through Cadence&#146;s subsidiaries
in Ireland and Japan. The premium costs of the put options are
recorded in other current assets while the gains and losses are
deferred and recognized in income in the same period as the
hedged transaction. Gains and losses on accounting hedges
realized before the settlement date of the related hedged
transaction are also generally deferred and recognized in income
in the same period as the hedged transaction. Cadence does not
use forward contracts and put options for trading purposes.
Cadence&#146;s ultimate realized gain or loss with respect to
currency fluctuations will depend on the currency exchange rates
and other factors in effect as the forward contracts and put
options mature.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below provides information as of June&nbsp;30, 2001
about Cadence&#146;s forward contracts. As of June&nbsp;30,
2001, there were no put options outstanding. The information is
provided in U.S. dollar equivalent

<P align="center"><FONT size="2">40
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
amounts. The table presents the notional amounts, at contract
exchange rates, and the weighted average contractual foreign
currency exchange rates. These forward contracts mature prior to
September&nbsp;13, 2001.
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Notional</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Contract</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Rate</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">(In millions)</FONT></B></TD>
	<TD></TD>
	<TD colspan="3"></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Forward Contracts:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Euro
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">37.8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">0.86</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Japanese yen
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">24.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">121.54</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Swedish krona
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">11.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">10.59</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">British pound sterling
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">8.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.37</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Canadian dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.9</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.53</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Hong Kong dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">7.80</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Singapore dollars
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.81</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="1" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">89.1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Estimated fair value
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">(0.4</FONT></TD>
	<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;<HR size="4" noshade></FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While Cadence actively manages its foreign currency risks on an
ongoing basis, there can be no assurance that Cadence&#146;s
foreign currency hedging activities will substantially offset
the impact of fluctuations in currency exchange rates on its
results of operations, cash flows, and financial position. On a
net basis, foreign currency fluctuations did not have a material
impact on Cadence&#146;s consolidated results of operations and
financial position during the quarter ended June&nbsp;30, 2001.
The realized gain (loss)&nbsp;on the forward contracts as they
matured was not material to the consolidated operations of
Cadence.

<P align="left">
<B><I>&nbsp;&nbsp;&nbsp;Equity Price Risk</I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence repurchases shares of its common stock under its stock
repurchase program. Repurchased shares will be used for general
corporate purposes including the share issuance requirements of
Cadence&#146;s employee stock option and purchase plans and
acquisitions. As part of these repurchase programs, Cadence has
purchased and will purchase call options or has sold and will
sell put warrants. The put warrants, if exercised and settled by
physical delivery of shares, would entitle the holder to sell
shares of Cadence common stock to Cadence at a specified price.
Similarly, the call options entitle Cadence to buy shares of
Cadence common stock at a specified price. Cadence has the
option to elect &#147;net share settlement&#148;, rather than
physical settlement, of put warrants that are exercised; that
is, Cadence has the right to settle the exercised put warrants
with shares of Cadence common stock valued at the difference
between the exercise price and the fair value of the stock at
the date of exercise. These transactions may result in sales of
a large number of shares and consequent decline in the market
price of Cadence common stock. Cadence&#146;s stock repurchase
program includes the following characteristics:
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Call options allow Cadence to buy shares of its common stock on
	a specified day at a specified price. If the market price of the
	stock is greater than the exercise price of a call option,
	Cadence will typically exercise the option and receive shares of
	its stock. If the market price of the common stock is less than
	the exercise price of a call option, Cadence typically will not
	exercise the option.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Call option issuers may accumulate a substantial number of
	shares of Cadence common stock in anticipation of Cadence&#146;s
	exercising its call option and may dispose of these shares if
	and when Cadence fails to exercise its call option. This could
	cause the market price of Cadence common stock to fall.</TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">41
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="6%"></TD>
	<TD width="4%"></TD>
	<TD width="90%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Depending on the exercise price of the put warrants and the
	market price of Cadence common stock at the time of exercise,
	&#147;net share settlement&#148; of the put warrants with
	Cadence common stock could cause Cadence to issue a substantial
	number of shares to the holder of the put warrant. The holder
	may sell these shares in the open market, which could cause the
	price of Cadence common stock to fall.</TD>
</TR>

<TR>
	<TD>&nbsp;</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>&#149;</TD>
	<TD align="left">
	Put warrant holders may accumulate a substantial number of
	shares of Cadence common stock in anticipation of exercising
	their put warrants and may dispose of these shares if and when
	they exercise their put warrants and Cadence issues shares in
	settlement of their put warrants. This could also cause the
	market price of Cadence common stock to fall.</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below provides information as of June&nbsp;30, 2001
about Cadence&#146;s outstanding put warrants and call options.
The table presents the contract amounts and the weighted average
strike prices. The put warrants and call options expire on
various dates through February 2002 and Cadence has the
contractual ability to settle the options prior to their
maturity.

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Estimated</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Maturity</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Maturity</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
</TR>

<TR>
	<TD colspan="2"></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">(Shares and contract amounts in millions)
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Put Warrants:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Shares
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Weighted average strike price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25.15</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25.13</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Contract amount
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">86.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">42.4</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">35.6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD colspan="2" align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Call Options:
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Shares
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">1.3</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Weighted average strike price
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25.42</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">25.38</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Contract amount
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">63.5</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">31.7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">3.0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">42
</FONT>

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "PART II. OTHER INFORMATION" -->
<DIV align="left"><A NAME="009"></A></DIV>

<P align="left">
<B>PART II.&nbsp; OTHER INFORMATION</B>

<!-- link2 "Item 1.Legal Proceedings" -->
<DIV align="left"><A NAME="010"></A></DIV>

<P align="left">
<B>Item&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Legal
Proceedings</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From time to time Cadence is involved in various disputes and
litigation matters that arise in the ordinary course of
business. These include disputes and lawsuits related to
intellectual property, mergers and acquisitions, licensing,
contract law, distribution arrangements, and employee relations
matters.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cadence filed a complaint in the U.S. District Court for the
Northern District of California on December&nbsp;6, 1995 against
Avant! Corporation and certain of its employees for
misappropriation of trade secrets, copyright infringement,
conspiracy, and other illegal acts.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;16, 1996, Avant! filed various counterclaims
against Cadence and Joseph B. Costello, Cadence&#146;s former
President and Chief Executive Officer, and with leave of the
court, on January&nbsp;29, 1998, filed a second amended
counterclaim. The second amended counterclaim alleges, <I>inter
alia,</I> that Cadence and Mr.&nbsp;Costello had cooperated with
the Santa Clara County, California, District Attorney and
initiated and pursued its complaint against Avant! for
anti-competitive reasons, engaged in wrongful activity in an
attempt to manipulate Avant!&#146;s stock price, and utilized
certain pricing policies and other acts to unfairly compete
against Avant! in the marketplace. The second amended
counterclaim also alleges that certain Cadence insiders engaged
in illegal insider trading with respect to Avant!&#146;s stock.
Cadence and Mr. Costello believe that they have meritorious
defenses to Avant!&#146;s claims, and each intends to defend
such action vigorously. By an order dated July&nbsp;13, 1996,
the court bifurcated Avant!&#146;s counterclaim from
Cadence&#146;s complaint and stayed the counterclaim pending
resolution of Cadence&#146;s complaint. The counterclaim remains
stayed.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In an order issued on December&nbsp;19, 1997, as modified on
January&nbsp;26, 1998, the District Court entered a preliminary
injunction barring Avant! from any further infringement of
Cadence&#146;s copyrights in DESIGN FRAMEWORK II&#174; software,
or selling, licensing or copying such product derived from
DESIGN FRAMEWORK II, including, but not limited to,
Avant!&#146;s ArcCell products. On December&nbsp;7, 1998, the
District Court issued a further preliminary injunction, which
enjoined Avant! from selling its Aquarius product line. Cadence
posted a $10&nbsp;million bond in connection with the issuance
of the preliminary injunction. On July&nbsp;30, 1999, the U.S.
Court of Appeals for the Ninth Circuit affirmed the preliminary
injunction.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
By an order dated July&nbsp;22, 1997, the District Court stayed
most activity in the case pending in that court and ordered
Avant! to post a $5&nbsp;million bond in light of related
criminal proceedings pending against Avant! and several of its
executives.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;7, 1999, the District Court ruled on the
parties&#146; Motions for Summary Adjudication, and granted in
part, and denied in part, each party&#146;s motion regarding the
scope of a June&nbsp;6, 1994 Release Agreement between the
parties. The court held that Cadence&#146;s copyright
infringement claim against Avant! is not barred by the release
and that Cadence may proceed on that claim. The court also held
that Cadence&#146;s trade secret claim based on Avant!&#146;s
use of Cadence&#146;s DESIGN FRAMEWORK II source code is barred
by the release. On May&nbsp;15, 2001, the Ninth Circuit heard
oral arguments by both parties on their appeals from the
District Court&#146;s order. On June&nbsp;11, 2001, the Ninth
Circuit certified a question of California law to the California
Supreme Court. The Ninth Circuit&#146;s request has not yet been
accepted or rejected by the California Supreme Court. The trial
date has been vacated pending a decision on the appeal.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 1998, Aptix Corporation and Meta Systems, Inc. filed
a lawsuit against Quickturn Design Systems, Inc. in the U.S.
District Court for the Northern District of California. In this
lawsuit, entitled Aptix Corporation and Meta Systems, Inc. v.
Quickturn Design Systems, Civil Action No.&nbsp;C&nbsp;98-00762
WHA, Aptix and Meta Systems alleged that Quickturn infringed a
U.S. patent owned by Aptix and licensed to Meta. Quickturn filed
a counterclaim requesting the District Court to declare the
Aptix patent invalid in view of the prior art and unenforceable
based on inequitable conduct during the

<P align="center"><FONT size="2">43
</FONT>

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<DIV align="left">
prosecution of the patent. In June 2000 the District Court
entered judgment in favor of Quickturn, dismissing the complaint
and declaring the patent unenforceable. The Court also granted
summary judgment to Aptix denying Quickturn&#146;s abuse of
process counterclaim, and Quickturn filed an appeal brief on
June&nbsp;30, 2000. On September&nbsp;8, 2000 the Court ordered
Aptix to pay $4.2&nbsp;million to Quickturn as reimbursement to
Quickturn of the attorneys&#146; fees and costs it incurred in
the litigation. Aptix has appealed the District&#146;s
Court&#146;s judgment and, in the meantime, has agreed to post a
$2 million bond to secure the judgment. The U.S. Court of
Appeals for the Federal Circuit heard oral arguments on
June&nbsp;7, 2001 on Aptix and Meta&#146;s appeal of the
sanctions and claim construction and on Quickturn&#146;s appeal
of the denial of its abuse of process counterclaim. On
June&nbsp;8, 2001, the Federal Circuit affirmed the District
Court&#146;s dismissal of Quickturn&#146;s abuse of process
counterclaim. Aptix&#146;s appeal is under submission.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;7, 1999, in the suit captioned Mentor Graphics
Corporation, et. al. v. Lobo, et. al., Delaware Chancery Court,
New Castle County, Civ. Action No.&nbsp;16843-NC (&#147;Mentor
v. Lobo&#148;), an amended complaint was filed and served by
Mentor asserting claims against Cadence, Quickturn Design
Systems, Inc. and its Board of Directors for declaratory and
injunctive relief for various alleged breaches of fiduciary duty
purportedly owned by Quickturn and its Board of Directors to
Quickturn&#146;s shareholders in connection with the merger
between Quickturn and Cadence. Mentor alleged that Cadence aided
and abetted Quickturn and its Board of Directors in those
purported breaches. Mentor has not prosecuted the matter since
January 1999. In May 2000, Mentor advised the Delaware Chancery
Court of its objection to the settlement of a companion action
brought on behalf of certain Quickturn shareholders. Mentor
further advised the court that it would seek an award of
attorneys&#146; fees related to its prosecution of the
Mentor&nbsp;v.&nbsp;Lobo action. At the request of the court, on
July 28, 2000, Mentor filed its brief in support of its standing
to seek such an award. Cadence, Quickturn and the individual
defendants have opposed Mentor&#146;s request. A hearing on the
matter was held on February&nbsp;2, 2001. The court has taken
the matter under submission.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;30, 1999, Cadence and several of its officers and
directors were named as defendants in a lawsuit filed in the
U.S. District Court for the Northern District of California,
entitled Spett v. Cadence Design Systems, et al., civil action
no. C 99-2082. The action was brought on behalf of a class of
stockholders who purchased Cadence common stock between
November&nbsp;4, 1998 and April&nbsp;20, 1999, and alleges
violations of Sections&nbsp;10(b) and 20(a) of the Securities
Exchange Act of 1934. The lawsuit arises out of Cadence&#146;s
announcement of its first quarter 1999 financial results. On
September&nbsp;18, 2000 the District Court granted
Cadence&#146;s Motion to Dismiss Plaintiffs&#146; Claims with
leave to amend. To date, no amended complaint has been filed.
Should an amended complaint be filed, Cadence and the individual
defendants intend to continue their vigorous defense of the
allegations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In early 1999, Cadence entered into negotiations with Intelect
Communications, Inc., and Intelect&#146;s wholly-owned
subsidiary, DNA Enterprises, Inc., with respect to a potential
purchase of substantially all the assets of DNA. The transaction
was not consummated and, in July 1999, Intelect and DNA filed
suit against Cadence in a Texas state court alleging breach of
contract, fraud, negligent misrepresentation and breach of
fiduciary duty, seeking unspecified compensatory and punitive
damages. Cadence has answered, denying liability, and discovery
has concluded. In February 2001, Cadence filed a motion for
partial summary judgment. The Court has taken the motion under
submission but has not yet issued a ruling. A trial date has
been scheduled for October&nbsp;1, 2001. Cadence believes that
it has defenses to, and it disputes, the allegations made by
Intelect and DNA, including the allegation that a purchase
contract was entered into, and intends to defend the action
vigorously.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On July&nbsp;21, 1999, Mentor filed suit against Quickturn in
the U.S. District Court for the District of Delaware, alleging
that Quickturn&#146;s MERCURY&#153; hardware emulation systems
infringe U.S. Patent Nos. 5,777,489 and 5,790,832 allegedly
assigned to Mentor. At Quickturn&#146;s request, Cadence was
added as a party defendant. Mentor has since asserted that
Quickturn&#146;s MERCURYPLUS&#153; emulation systems also
infringe

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<DIV align="left">
U.S. Patent Nos. 5,777,489 and 5,790,832. The complaint seeks a
permanent injunction and unspecified damages. Cadence intends to
vigorously defend itself against these claims. On
December&nbsp;14, 1999, this action was transferred to the U.S.
District Court for the Northern District of California, and
renumbered Civil Action No. C 99-5464 SI.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;25, 2000, Cadence and several of its officers
were named as defendants in a lawsuit filed in the U.S. District
Court for the Northern District of California, entitled Maxick
v. Cadence Design Systems, Inc., File No.&nbsp;C 00 0658PJH. The
action was brought on behalf of a class of shareholders of
OrCAD, Inc., and alleges violations of Section&nbsp;14(d)(7) of
the Securities Exchange Act of 1934, as amended, and
Rule&nbsp;14d-10 thereunder. The lawsuit arises out of
Cadence&#146;s acquisition of OrCAD, which was completed in
August 1999. Cadence&#146;s Motion to Dismiss plaintiffs&#146;
claims was denied. Discovery is continuing. The defendants
believe the complaint is without merit and intend to continue
their vigorous defense of the allegations.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;24, 2000, Mentor and Meta and several founders of
Meta filed suit against Quickturn and Cadence and a former
Quickturn employee in the U.S. District Court for the Northern
District of California, Civil Action No.&nbsp;C 00-01030 WHA.
The suit alleges patent infringement of a U.S. Patent allegedly
assigned to Mentor, misappropriation of trade secrets and breach
of confidence, and seeks unspecified damages, injunctive relief
and the assignment to Mentor of a patent previously issued to
Quickturn. Cadence intends to vigorously defend itself against
these claims, and has filed a counterclaim for declaratory
judgment of invalidity of several patents allegedly assigned to
Mentor. Following a motion by Cadence, the former Quickturn
employee was dismissed as a party to the action. Discovery in
the action has subsequently been consolidated with discovery in
Civil Action No.&nbsp;C 99-5464, the Mentor v. Quickturn suit
transferred from Delaware.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;11, 2000, Mentor filed a complaint against
Quickturn and Cadence in the U.S. District Court for the
Northern District of California (Case No.&nbsp;C-00-03291)
accusing Quickturn and Cadence of infringing U.S. Patent
No.&nbsp;5,574,388, purportedly owned by Mentor and seeking
unspecified damages and injunctive relief. Quickturn and Cadence
believe the complaint filed by Mentor is without substance and
that the patent that is the subject of this suit in invalid and
not infringed. Cadence and Quickturn are vigorously defending
the claim. On November&nbsp;3, 2000, Mentor filed a motion for
preliminary injunction, asking the Court to prohibit the sale of
Quickturn&#146;s MERCURYPLUS emulation systems prior to trial of
this action. The hearing on that motion was held on
April&nbsp;17, 2001. The Court took the matter under submission.
The parties have agreed to consolidate this action with Civil
Action Nos. C99-5464 and C&nbsp;00-01030 WHA, described above,
for purposes of discovery and pre-trial motions. A trial date of
October&nbsp;7, 2002 has been set for all three actions.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;2, 2000, Mentor and Meta filed a complaint for
declaratory judgment against Quickturn and Cadence in the U.S.
District Court for the District of Oregon (Case
No.&nbsp;C-00-1489) seeking a ruling that Mentor&#146;s proposed
design verification approach (in which chip designers would use
U.S.-based computer terminals to operate SimExpress emulation
systems located overseas) will not infringe Quickturn&#146;s
patents and will not violate the permanent injunction entered by
the Oregon District Court on July&nbsp;7, 1999 in Civil Action
No.&nbsp;C-96-00342. On January&nbsp;5, 2001, Quickturn and
Cadence answered the complaint. In their answer, Quickturn and
Cadence denied Mentor and Meta&#146;s contention, and asserted
that Mentor and Meta&#146;s complaint lacks subject matter
jurisdiction and is barred by res judicata and collateral
estoppel. In January 2001, Quickturn and Cadence filed a Motion
to Dismiss the action, based on lack of subject matter
jurisdiction. On May&nbsp;1, 2001, the Court provisionally
granted Quickturn&#146;s motion to dismiss.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;22, 2000, a former design services customer,
Uniden Corporation, filed an action for fraud, negligent
misrepresentation and breach of contract in the State Court of
Texas against Cadence and other corporate defendants. Uniden
seeks compensatory and punitive damages in an unspecified
amount. The suit was filed after Cadence demanded payment of
approximately $1 million for design services rendered

<P align="center"><FONT size="2">45
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
to Uniden. Cadence since has filed a counterclaim to recover the
approximate $1&nbsp;million owed for services rendered. The
parties agreed to dismiss voluntarily the actions pending in the
State Court of Texas and to re-file in the State Court of
California, County of Orange. Uniden refilled its Complaint on
July&nbsp;2, 2001 in Orange County, California. Cadence intends
to file its answer and counterclaim on or before
September&nbsp;11, 2001.
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;28, 2000, a former design services customer,
Scanz Communications, filed an action for fraud, breach of
contract, negligence, intentional interference with prospective
advantage, negligent interference with prospective advantage,
negligent misrepresentation and unfair business practices in the
Los Angeles Superior Court of California against Cadence and
Tality. Scanz seeks compensatory and punitive damages in an
unspecified amount. The suit was filed after Cadence demanded
payment of $4,657,556.17 for design services rendered to Scanz.
Cadence demurred to Scanz&#146; complaint. Cadence&#146;s
demurrer was sustained on all causes of actions. Accordingly,
Scanz&#146;s complaint was dismissed on March&nbsp;13, 2001,
with leave to amend. Cadence and Tality filed a Complaint
against Scanz in April 2001 for recovery of the $4,657,556.17
owed. Scanz filed its First Amended Complaint on April&nbsp;2,
2001, to which Cadence demurred on May&nbsp;7, 2001. Cadence
filed a cross-complaint against Scanz on May&nbsp;8, 2001. On
June&nbsp;25, 2001, Cadence&#146;s demurrers to the first
amended complaint were sustained in part. On July&nbsp;10, 2001
Scanz filed a second amended complaint.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;2, 2001 Cadence filed a cross-complaint against
Scanz alleging breach of contract and unjust enrichment, and
seeking declaratory relief. On July&nbsp;12, 2001, Scanz filed
an answer to Cadence&#146;s cross-complaint denying all
allegations. Cadence intends to vigorously defend the claims
alleged by Scanz.

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management believes that the ultimate resolution of the disputes
and litigation matters discussed above will not have a material
adverse effect on Cadence&#146;s business, operating results or
financial condition. However, were an unfavorable ruling to
occur in any specific period, there exists the possibility of a
material adverse impact on the result of operations.

<!-- link2 "Item 2. Changes in Securities and Use of Proceeds" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="left">
<B>Item&nbsp;2.&nbsp; Changes in Securities and Use of
Proceeds</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the quarter ended June&nbsp;30, 2001, 272,297 shares of
common stock were issued by Cadence in connection with one of
Cadence&#146;s acquisitions pursuant to an exemption under
Regulation&nbsp;S under the Securities Act of 1933, as amended.

<!-- link2 "Item 3. Defaults Upon Senior Securities" -->
<DIV align="left"><A NAME="012"></A></DIV>

<P align="left">
<B>Item&nbsp;3.&nbsp; Defaults Upon Senior Securities</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None.

<P align="center"><FONT size="2">46
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link2 "Item 4. Submission of Matters to a Vote of Security Holders" -->
<DIV align="left"><A NAME="013"></A></DIV>

<P align="left">
<B>Item&nbsp;4.&nbsp; Submission of Matters to a Vote of
Security Holders</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the Annual Meeting of Stockholders held on May&nbsp;16, 2001,
the stockholders of Cadence approved the following matters:

<P align="left">
1. A proposal to elect eight (8)&nbsp;directors of Cadence to
serve for the ensuing year and until their successors are
elected or until such director&#146;s earlier resignation or
removal.

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD align="center" nowrap><FONT size="1">Nominee</FONT></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">In Favor</FONT></B></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Withheld</FONT></B></TD>
</TR>

<TR>
	<TD align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">H. Raymond Bingham
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">183,380,447</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">42,440,790</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Susan L. Bostrom
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225,261,500</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">559,737</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dr.&nbsp;Leonard Y.W. Liu
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225,238,755</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">582,482</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Donald L. Lucas
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225,214,844</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">606,393</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dr.&nbsp;Alberto Sangiovanni-Vincentelli
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">187,255,565</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">38,565,672</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">George M. Scalise
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225,246,927</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">574,310</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Dr.&nbsp;John B. Shoven
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225,259,217</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">562,020</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD align="left" valign="top">
	<DIV style="margin-left:10px; text-indent:-10px">
	<FONT size="2">Roger S. Siboni
	</FONT></DIV>
	</TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">225,258,878</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="bottom" nowrap><FONT size="2">562,359</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
2. A proposal to approve the Amended and Restated Senior
Executive Bonus Plan was approved by a vote of 220,789,910 for,
4,743,608 opposed, and 287,719 withheld.

<P align="left">
3. A proposal for the ratification of the selection of Arthur
Andersen LLP as independent public accountants for the fiscal
year ending December&nbsp;29, 2001 was approved by a vote of
221,634,239 for, 4,136,224 opposed, and 50,774 withheld.

<!-- link2 "Item 5. Other Information" -->
<DIV align="left"><A NAME="014"></A></DIV>

<P align="left">
<B>Item&nbsp;5.&nbsp; Other Information</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None.

<!-- link2 "Item 6. Exhibits and Reports on Form 8-K" -->
<DIV align="left"><A NAME="015"></A></DIV>

<P align="left">
<B>Item&nbsp;6.&nbsp; Exhibits and Reports on Form&nbsp;8-K</B>

<P align="left">
(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following exhibits are filed herewith:

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="1">Exhibit Title</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.1</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Assignment and Assumption Agreement, dated as of
	June&nbsp;2, 2001, by and between Tality Corporation and Tality,
	LP.
	</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.1</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Master Amendment and Consent, effective as of
	June&nbsp;2, 2001 by and among the Registrant, Tality
	Corporation, Tality Transition Corporation, Tality, LP, and
	Cadence Holdings, Inc.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.5</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">0</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Tality Holdings, Inc. 2000 Equity Incentive Plan.
	</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.5</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">1</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Tality Holdings, Inc. Directors Stock Option Plan.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.5</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">6</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Form of Letter Agreement between the Registrant
	and certain holders of Tality Corporation Class&nbsp;A Common
	Stock and regarding the repurchase of Tality stock.
	</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.5</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">7</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">The Registrant&#146;s 2001 Employee Stock
	Purchase Plan.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.5</FONT></TD>
	<TD align="left" valign="top" nowrap><FONT size="2">8</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">The Registrant&#146;s Non-Qualified Employee
	Stock Purchase Plan.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reports
on Form&nbsp;8-K:

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None.

<P align="center"><FONT size="2">47
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="016"></A></DIV>

<P align="center">
<B>SIGNATURES</B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="39%"></TD>
	<TD width="61%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	<B>CADENCE DESIGN SYSTEMS, INC.</B></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	<B>(Registrant)</B></TD>
</TR>

</TABLE>

<P align="left">
DATE: <U>August&nbsp;13, 2001</U>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="3%"></TD>
	<TD width="59%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>By:&nbsp;</TD>
	<TD align="left">
	/s/ H. Raymond Bingham</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	<HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	H. Raymond Bingham</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	President, Chief Executive Officer, and Director</TD>
</TR>

</TABLE>

<P align="left">
DATE: <U>August&nbsp;13, 2001</U>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="3%"></TD>
	<TD width="59%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD>By:&nbsp;</TD>
	<TD align="left">
	/s/ William Porter</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
	<TD width="38%"></TD>
	<TD width="62%"></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	<HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	William Porter</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	Senior Vice President</TD>
</TR>

<TR valign="top">
	<TD>&nbsp;</TD>
	<TD align="left">
	and Chief Financial Officer</TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">48
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B>EXHIBIT&nbsp;INDEX</B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
	<TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
	<TD></TD>
	<TD></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
	<TD></TD>
	<TD align="center" nowrap><B><FONT size="1">Exhibit Title</FONT></B></TD>
</TR>

<TR>
	<TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
	<TD></TD>
	<TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.17</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Assignment and Assumption Agreement, dated as of
	June&nbsp;2, 2001, by and between Tality Corporation and Tality,
	LP.
	</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">2.18</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Master Amendment and Consent, effective as of
	June&nbsp;2, 2001 by and among the Registrant, Tality
	Corporation, Tality Transition Corporation, Tality, LP, and
	Cadence Holdings, Inc.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.50</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Tality Holdings, Inc. 2000 Equity Incentive Plan.
	</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.51</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Tality Holdings, Inc. Directors Stock Option Plan.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.56</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">Form of Letter Agreement between the Registrant
	and certain holders of Tality Corporation Class&nbsp;A Common
	Stock and regarding the repurchase of Tality stock.
	</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.57</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">The Registrant&#146;s 2001 Employee Stock
	Purchase Plan.
	</FONT></TD>
</TR>

<TR>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="right" valign="top" nowrap><FONT size="2">10.58</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD><FONT size="2">&nbsp;</FONT></TD>
	<TD align="left" valign="top">
	<FONT size="2">The Registrant&#146;s Non-Qualified Employee
	Stock Purchase Plan.
	</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">49
</FONT>
</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.17
<SEQUENCE>3
<FILENAME>f74874ex2-17.txt
<DESCRIPTION>EXHIBIT 2.17
<TEXT>
<PAGE>   1
                                                                   EXHIBIT 2.17




                   GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT

                                 BY AND BETWEEN



                                   TALITY, LP

                                       AND

                             NEW TALITY CORPORATION



                                   DATED AS OF

                                  JUNE 2, 2001






<PAGE>   2

                                                                   EXHIBIT 2.17




                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>                                                                                       <C>
ARTICLE I  DEFINITIONS......................................................................1
        Section 1.1   Action................................................................1
        Section 1.2   Applicable Law........................................................1
        Section 1.3   Assets................................................................1
        Section 1.4   Contracts.............................................................3
        Section 1.5   Excluded Assets.......................................................3
        Section 1.6   Excluded Liabilities..................................................3
        Section 1.7   Governmental Authority................................................3
        Section 1.8   Information...........................................................3
        Section 1.9   Insurance Policies....................................................4
        Section 1.10  Insurance Proceeds....................................................4
        Section 1.11  Insured Partnership Liabilities.......................................4
        Section 1.12  Intellectual Property.................................................4
        Section 1.13  Liabilities...........................................................4
        Section 1.14  Partnership Assets....................................................4
        Section 1.15  Partnership Balance Sheet.............................................5
        Section 1.16  Partnership Business..................................................5
        Section 1.17  Partnership Contingent Liability......................................5
        Section 1.18  Partnership Contracts.................................................6
        Section 1.19  Partnership Liabilities...............................................6
        Section 1.20  Partnership Special Gain..............................................7
        Section 1.21  Person................................................................8
        Section 1.22  Security Interest.....................................................8
        Section 1.23  Subsidiary............................................................8
        Section 1.24  Taxes.................................................................9

ARTICLE II  CONTRIBUTION AND ASSUMPTION.....................................................9
        Section 2.1   Contribution of Assets and Assumption of Liabilities..................9
        Section 2.2   Methods of Transfer and Assumption....................................9
        Section 2.3   Novation of Assumed Partnership Liabilities..........................10

ARTICLE III  LITIGATION....................................................................11
        Section 3.1   Allocation...........................................................11
        Section 3.2   Cooperation..........................................................11

ARTICLE IV  MISCELLANEOUS..................................................................12
        Section 4.1   Incorporation by Reference...........................................12
        Section 4.2   Conflicting Agreements...............................................12

</TABLE>




                                       i


<PAGE>   3

                                                                   EXHIBIT 2.17


                   GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT

        THIS GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is
entered into and effective as of June 2, 2001 by and between Tality, LP, a
Delaware limited partnership (the "Partnership"), and New Tality Corporation, a
Delaware corporation ("New Tality"). Capitalized terms used herein and not
defined elsewhere herein shall have the meanings ascribed to them in Article I.

                                    RECITALS

        WHEREAS, New Tality is a newly formed corporation, with no assets or
liabilities as of the date hereof; and

        WHEREAS, the Board of Directors of New Tality and the partners of the
Partnership have each determined that it would be appropriate and desirable for
the Partnership to transfer (or cause to be transferred) to New Tality, and for
New Tality to receive and assume certain assets and liabilities in exchange for
100% of the stock of New Tality, on the terms and subject to the conditions set
forth in this Agreement.

                                    AGREEMENT

        NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

        Section 1.1 "Action" means any demand, action, suit, counter suit,
arbitration, inquiry, audit, proceeding or investigation by or before any
federal, state, local, foreign or international Governmental Authority or any
arbitration or mediation tribunal.

        Section 1.2 "Applicable Law"" means all laws and regulations of
Governmental Authorities applicable to the transaction, property or Persons at
issue.

        Section 1.3 "Assets" means assets, properties and rights (including
goodwill), wherever located (including in the possession of vendors or other
third parties or elsewhere), whether real, personal or mixed, tangible,
intangible or contingent, in each case whether or not recorded or reflected or
required to be recorded or reflected on the books and records or financial
statements of any Person, including the following:

               (i) all accounting and other books, records and files whether in
        paper, microfilm, microfiche, computer tape or disc, magnetic tape or
        any other form;

               (ii) all apparatus, computers and other electronic data
        processing equipment, automobiles, trucks, aircraft, rolling stock,
        vessels, motor vehicles and other transportation equipment, special and
        general tools, test devices, prototypes and models and other tangible
        personal property;



                                       1



<PAGE>   4

               (iii) all inventories, parts, raw materials, supplies,
        work-in-process and finished goods and products;

               (iv) all interests in real property of whatever nature, including
        easements, whether as owner, mortgagee or holder of a Security Interest,
        lessor, sublessor, lessee, sublessee or otherwise;

               (v) all bonds, notes, debentures or other securities issued by
        any Subsidiary or any other Person; all loans, advances or other
        extensions of credit or capital contributions to any Subsidiary or any
        other Person; and all other investments in securities of any Person;

               (vi) all license agreements, leases of personal property, open
        purchase orders for raw materials, supplies, parts or services, unfilled
        orders for the manufacture and sale of products and other contracts,
        agreements or commitments;

               (vii) all deposits, letters of credit and performance and surety
        bonds;

               (viii) all written technical information, data, specifications,
        research and development information, engineering drawings, operating
        and maintenance manuals, and materials and analyses prepared by
        consultants and other third parties;

               (ix) all Intellectual Property and licenses from third Persons
        granting the right to use any Intellectual Property;

               (x) all computer applications, programs and other software,
        including operating software, network software, firmware, middleware,
        design software, design tools, systems documentation and instructions;

               (xi) all cost information, sales and pricing data, customer
        prospect lists, supplier records, customer and supplier lists, customer
        and vendor data, correspondence and lists, product literature, artwork,
        design, development and manufacturing files, vendor and customer
        drawings, formulations and specifications, quality records and reports
        and other books, records, studies, surveys, reports, plans and
        documents;

               (xii) all prepaid expenses, trade accounts and other accounts and
        notes receivables;

               (xiii) all rights under contracts or agreements, all claims or
        rights against any Person arising from the ownership of any Asset, all
        rights in connection with any bids or offers and all claims, choses in
        action or similar rights, whether accrued or contingent;

               (xiv) all rights under Insurance Policies and all rights in the
        nature of insurance, indemnification or contribution;





                                       2


<PAGE>   5

               (xv) all licenses, permits, approvals and authorizations which
        have been issued by any Governmental Authority;

               (xvi) cash or cash equivalents, bank accounts, lock boxes and
        other deposit arrangements; and

               (xvii) interest rate, currency, commodity or other swap, collar,
        cap or other hedging or similar agreements or arrangements.

        Section 1.4 "Contracts" means any contract, agreement, lease, license,
sales order, purchase order, instrument or other commitment that is binding on
any Person or any part of its property under Applicable Law.

        Section 1.5   "Excluded Assets" means:

               (i) All equity interests in Subsidiaries of Tality, LP not
        incorporated in the United States.

               (ii) All receivables and loans owed to Tality, LP by all
        Subsidiaries; and

               (ii) cash held by the Partnership up to an aggregate amount of
        $8,266,194.

        Section 1.6   "Excluded Liabilities" means:

               (i) Any liabilities, solely relating to, arising out of or
        resulting from the Excluded Assets; and

               [(ii) all Insured Partnership Liabilities.]

        Section 1.7 "Governmental Authority" means any federal, state, local,
foreign or international court or government of competent jurisdiction, or any
political subdivision thereof, or any department, commission, board, bureau,
agency, official or other regulatory, administrative body of any such government
of competent jurisdiction or political subdivision thereof.

        Section 1.8 "Information" means information, whether or not patentable
or copyrightable, in written, oral, electronic or other tangible or intangible
form, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product) and other technical, financial,
employee or business information or data.

        Section 1.9 "Insurance Policies" means insurance policies pursuant to
which a Person makes a true risk transfer to an insurer.




                                       3


<PAGE>   6

        Section 1.10 "Insurance Proceeds" means those monies:

               (i) received by an insured from an insurance carrier; or

               (ii) paid by an insurance carrier on behalf of the insured; from
        Insurance Policies.

        Section 1.11 "Insured Partnership Liabilities" means any Partnership
Liability to the extent that it is covered under the terms of Cadence Design
Systems, Inc.'s ("Cadence") Insurance Policies in effect prior to the date
hereof for which Partnership or any of its Subsidiaries are a named insured
under, or otherwise entitled to the benefits of, such Insurance Policies.

        Section 1.12 "Intellectual Property" means all domestic and foreign
patents and patent applications, together with any continuations,
continuations-in-part or divisional applications thereof, and all patents
issuing thereon (including reissues, renewals and re-examinations of the
foregoing); design patents, invention disclosures; mask works; copyrights, and
copyright applications and registrations; Web addresses, trademarks, service
marks, trade names, and trade dress, in each case together with any applications
and registrations therefor and all appurtenant goodwill relating thereto; trade
secrets, commercial and technical information, know-how, proprietary or
confidential information, including engineering, production and other designs,
notebooks, processes, drawings, specifications, formulae, and technology;
computer and electronic data processing programs and software (object and source
code), data bases and documentation thereof; inventions (whether patented or
not); registered designs, certificates of invention and all other intellectual
property under the laws of any country throughout the world.

        Section 1.13 "Liabilities" means all debts, liabilities, guarantees,
assurances, commitments and obligations, whether fixed, contingent or absolute,
asserted or unasserted, matured or unmatured, liquidated or unliquidated,
accrued or not accrued, known or unknown, due or to become due, whenever or
however arising (including whether arising out of any Contract or tort based on
negligence or strict liability) and whether or not the same would be required by
U.S. GAAP to be reflected in financial statements or disclosed in the notes
thereto.

        Section 1.14 "Partnership Assets" means (without duplication) the
following Assets (other than those Assets constituting Excluded Assets):

               (i) all Assets reflected on the Partnership Balance Sheet,
        subject to any dispositions of such Assets after the date of the
        Partnership Balance Sheet;

               (ii) all Assets that have been written off, expensed or fully
        depreciated that, had they not been written off, expensed or fully
        depreciated, would have been reflected on the Partnership Balance Sheet
        in accordance with the principles and accounting policies under which
        the Partnership Balance Sheet was prepared;

               (iii) all Assets acquired by the Partnership after the date of
        the Partnership Balance Sheet that would be reflected on the
        consolidated balance sheet date hereof if such consolidated balance
        sheet was prepared using the same




                                       4

<PAGE>   7

        principles and accounting policies under which the Partnership Balance
        Sheet was prepared.

               (iv) all Assets that are used solely by the Partnership Business
        as of the date hereof but are not reflected on the Partnership Balance
        Sheet due to mistake or omission (as determined by Partnership in its
        sole and absolute discretion);

               (v) all Partnership Special Gains;

               (vi) all Partnership Contracts; and

               (vii) to the extent permitted by Applicable Law, all rights of
        the Partnership under any of Cadence's Insurance Policies or
        Partnerships' Insurance Policies.

        Section 1.15 "Partnership Balance Sheet" means the consolidated balance
sheet (including the notes thereto) of the Partnership Business as of June 2,
2001.

        Section 1.16 "Partnership Business" means business of providing design
engineering services, and intellectual property in connection therewith, to
electronic equipment manufacturers and other customers in the United States.

        Section 1.17 "Partnership Contingent Liability" means any Liability,
other than Liabilities for Taxes, of the Partnership that is reflected on, or,
were it not for the reasons noted in clause (ii) below, would have been
reflected on, the Partnership Balance Sheet, whenever arising, to any Person
other the Partnership, if and to the extent that (i) such Liability arises out
of the events, acts or omissions occurring before the date hereof and (ii) the
existence or scope of the obligation the Partnership as of the date hereof with
respect to such Liability was not acknowledged, fixed or determined in any
material respect, due to a dispute or other uncertainty as of the date hereof or
as a result of the failure of such Liability to have been discovered or asserted
as of the date hereof (it being understood that the existence of a litigation or
other reserve with respect to any Liability shall not be sufficient for such
Liability to be considered acknowledged, fixed or determined); provided,
however, that the only Liabilities relating to, arising out of or resulting from
litigation matters pending on the date hereof that shall constitute Partnership
Contingent Liabilities are Liabilities relating to, arising out of or resulting
from the matters identified on Schedule 1.17. In the case of any Liability a
portion of which arises out of events, acts or omissions occurring prior to the
date hereof and a portion of which arises out of events, acts or omissions
occurring on or after the date hereof, only that portion that arises out of
events, acts or omissions occurring prior to the date hereof shall be considered
a Partnership Contingent Liability. For purposes of the foregoing, a Liability
shall be deemed to have arisen out of events, acts or omissions occurring prior
to the date hereof if all the elements necessary for the assertion of a claim
with respect to such Liability shall have occurred on or prior to the date
hereof, such that the claim, were it asserted in an Action on or prior to the
date hereof, would not be dismissed by a court on ripeness or similar grounds.
For purposes of clarifying the foregoing, the parties agree that no Liability
relating to, arising out of or resulting from any obligation of any Person to
perform the executory portion of any contract or agreement existing as of the
date


                                       5


<PAGE>   8

hereof, or to satisfy any obligation accrued under any Employee Benefits Plan as
of the date hereof, shall be deemed to be a Partnership Contingent Liability.

        Section 1.18 "Partnership Contracts" means the following contracts and
agreements to which Partnership is a party or by which it or any of its Assets
is bound, whether or not in writing, except for any such contract or agreement
that is contemplated to be retained by Partnership pursuant to this Agreement:

               (i) any contract or agreement reflected on the Partnership
        Balance Sheet, including without limitation, the Specified Separation
        Agreements;

               (ii) any contract or agreement entered into after October 4, 2000
        and designated by the Partnership (subject to the consent of New Tality,
        which shall not be unreasonably withheld) as a Partnership Contract;

               (iii) any contract or agreement that is otherwise expressly
        contemplated pursuant to this Agreement to be assigned to the
        Partnership; and

               (iv) any contract or agreement set forth on Schedule 1.18(iv).

        Section 1.19 "Partnership Liabilities" means (without duplication) the
following Liabilities (other than those Liabilities constituting Excluded
Liabilities):

               (i) all Liabilities reflected on the Tality Balance Sheet,
        subject to any discharge of such Liabilities subsequent to the date of
        the Tality Balance Sheet;

               (ii) all Liabilities of the Partnership that arise after the date
        of the Tality Balance Sheet that would be reflected on the consolidated
        balance sheet of Tality as of the date hereof if such consolidated
        balance sheet was prepared using the same principles and accounting
        policies under which the Tality Balance Sheet was prepared;

               (iii) all Liabilities that are related solely to the Partnership
        Business on the date hereof but are not reflected on the Partnership
        Balance Sheet due to mistake or unintentional omission (as determined by
        the Partnership in its sole and absolute discretion);

               (iv) all Partnership Contingent Liabilities;

               (v) all Liabilities (other than Liabilities for Taxes), whether
        arising before, on or after the date hereof, solely relating to, arising
        out of or resulting from:

                      (1) the operation of the Partnership Business, as
        conducted at any time prior to, on or after the date hereof (including
        any Liability relating to, arising out of or resulting from any act or
        failure to act by any director, officer, employee, agent or
        representative (whether or not such act or failure to act is or was
        within such Person's authority));




                                       6


<PAGE>   9

                      (2) the operation of any business conducted by any member
        of the Partnership at any time after the date hereof (including any
        Liability relating to, arising out of or resulting from any act or
        failure to act by any director, officer, employee, agent or
        representative (whether or not such act or failure to act is or was
        within such Person's authority)); or

                      (3) any Partnership Assets; and

               (vi) all Liabilities that are expressly contemplated by this
        Agreement or Schedule 1.19(vii), as Liabilities to be assumed by New
        Tality.

        Section 1.20 "Partnership Special Gain" means any claim or other right
of the Partnership that is reflected on, or, were it not for the reasons noted
in clause (ii) below, would have been reflected on, the Partnership Balance
Sheet, whenever arising, against any Person other than the Partnership, if and
to the extent that (i) such claim or right arises out of the events, acts or
omissions occurring before the date hereof (based on then existing law) and (ii)
the existence or scope of the obligation of such other Person as of the date
hereof was not acknowledged, fixed or determined in any material respect, due to
a dispute or other uncertainty as of the date hereof or as a result of the
failure of such claim or other right to have been discovered or asserted as of
the date hereof. A claim or right meeting the foregoing definition shall be
considered a Partnership Special Gain regardless of whether there was any Action
pending, threatened or contemplated as of the date hereof with respect thereto.
In the case of any claim or right a portion of which arises out of events, acts
or omissions occurring prior to the date hereof and a portion of which arises
out of events, acts or omissions occurring on or after the date hereof, only
that portion that arises out of events, acts or omissions occurring prior to the
date hereof shall be considered a Partnership Special Gain. For purposes of the
foregoing, a claim or right shall be deemed to have accrued as of the date
hereof if all the elements of the claim necessary for its assertion shall have
occurred on or prior to the date hereof, such that the claim or right, were it
asserted in an Action on or prior to the date hereof, would not be dismissed by
a court on ripeness or similar grounds. Notwithstanding the foregoing, none of
(i) any Insurance Proceeds, (ii) any Excluded Assets, (iii) any reversal of any
litigation or other reserve, and (iv) any matters relating to Taxes shall be
deemed to be a Partnership Special Gain.

        Section 1.21 "Person" means an individual, a partnership, a corporation,
a limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a Governmental Authority.

        Section 1.22 "Security Interest" means any mortgage, security interest,
pledge, lien, charge, claim, option, right to acquire, voting or other
restriction, right-of-way, covenant, condition, easement, encroachment,
restriction on transfer, or other encumbrance of any nature whatsoever.

        Section 1.23 "Specified Separation Agreements " means the following
agreements dated as of October 4, 2000 by and among Cadence, Cadence Holdings,
Inc., the Partnership, and Tality Corporation (except items (viii) and (xii), to
which the parties were Cadence and the Partnership), as amended:




                                       7


<PAGE>   10

               (i) Amended and Restated Master Separation Agreement (the
        "Separation Agreement");

               (ii) General Assignment and Assumption Agreement;

               (iii) Real Estate Matters Agreement;

               (iv) Master Confidentiality Agreement;

               (v) Indemnity and Insurance Matters Agreement;

               (vi) Master Intellectual Property Agreement;

               (vii) Employee Matters Agreement;

               (viii) Loaned Employee Agreement;

               (ix) Master Corporate Services Agreement;

               (x) Joint Sales Agreement;

               (xi) Joint Technology Development and Support Agreement; and

               (xii) EDA Tools Agreement.

        Section 1.24 "Subsidiary " of any Person means any other Person of which
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect at least a majority of the board of directors or
other body performing similar functions with respect to such other Person is
directly or indirectly owned or controlled (including by contract) by such first
Person.

        Section 1.25 "Taxes" means any foreign or U.S. federal, state, local or
municipal income, alternative or add-on minimum, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, value added
or any other tax, custom, tariff, impost, levy, duty, governmental fee or other
like assessment or charge of any kind whatsoever, together with any interest or
penalty, addition to tax or additional amount related thereto, imposed by any
governmental authority or any subdivision, agency, commission or authority
thereof, or any quasi-governmental or private body having jurisdiction over the
assessment, determination, collection or other imposition of the foregoing.

                                   ARTICLE II

                  CONTRIBUTION AND ASSUMPTION; NEW TALITY STOCK

        Section 2.1   Contribution of Assets and Assumption of Liabilities.





                                       8


<PAGE>   11


               (a) Contribution of Assets. Partnership hereby assigns,
transfers, conveys and delivers to New Tality, and New Tality hereby accepts
from the Partnership, Partnership's respective right, title and interest in and
to the Partnership Assets other than the Excluded Assets.

               (b) Assumption of Liabilities. New Tality hereby assumes and
agrees faithfully to perform and fulfill, all the Partnership Liabilities, other
than the Excluded Liabilities, in accordance with their respective terms.
Thereafter, New Tality shall be responsible for all Partnership Liabilities,
regardless of when or where such Liabilities arose or arise, or whether the
facts on which they are based occurred prior to, on or after the date hereof,
regardless of where or against whom such Liabilities are asserted or whether
asserted or determined prior to the date hereof, and regardless of whether
arising from or alleged to arise from negligence, recklessness, violation of
law, fraud or misrepresentation by any member of the Partnership.

        Section 2.2   Methods of Transfer and Assumption.

               (a) General. It is the intent of the parties hereto that pursuant
to Section 2.1 the transfer and assumption of all other Partnership Assets and
Partnership Liabilities shall be made effective as of the date hereof.

               (b) Mistaken Allocations. In addition to those transfers and
assumptions accurately identified and designated by the parties to take place
but which the parties are not able to effect prior to the date hereof, there may
exist (i) Assets that the parties discover were, contrary to this Agreement, by
mistake or omission, transferred or not transferred, as the case may be, to New
Tality or (ii) Liabilities that the parties discover were, contrary to this
Agreement, by mistake or omission, assumed or not assumed, as the case may be,
by New Tality. The parties hereto shall cooperate in good faith to effect the
transfer or re-transfer of such Assets, and/or the assumption or re-assumption
of such Liabilities, to or by the appropriate party with respect to the Assets
to be transferred to or Liabilities to be assumed by New Tality. Prior to any
such transfer, the Person receiving or possessing such Asset shall hold such
Asset in trust for the other Person. Each party shall reimburse the other or
make other financial adjustments (including cash reserves) or other adjustments
to remedy any mistakes or omissions relating to any of the Assets transferred
hereby or any of the Liabilities assumed hereby.

               (c) Documents Relating to Transfers of Assets and Assumption of
Liabilities. In furtherance of the assignment, transfer and conveyance of the
Partnership Assets and the assumption of Partnership Liabilities set forth in
Sections 2.2(a) and (b), simultaneously with the execution and delivery hereof
or as promptly as practicable thereafter, (i) Partnership shall execute and
deliver, and shall cause their respective Subsidiaries to execute and deliver,
such bills of sale, stock powers, certificates of title, assignments of
contracts and other instruments of transfer, conveyance and assignment as and to
the extent necessary to evidence the transfer, conveyance and assignment of all
of the Partnership's right, title and interest in and to the Partnership Assets
to New Tality effected by this Agreement; and (ii) New Tality execute and
deliver such assumptions of contracts and other instruments of assumption as and
to the extent necessary to evidence the valid and effective assumption of the
Partnership Liabilities by New Tality effected by this Agreement.





                                       9


<PAGE>   12

        Section 2.3   Novation of Assumed Partnership Liabilities.

               (a) Reasonable Commercial Efforts. Each of the parties shall use
all commercially reasonable efforts to obtain, or to cause to be obtained, any
consent, substitution, approval or amendment required to novate (including with
respect to any federal government contract) or assign all rights and obligations
under agreements, leases, licenses and other obligations or Liabilities of any
nature whatsoever that constitute Partnership Liabilities or to obtain in
writing the unconditional release of all parties to such arrangements so that,
in any such case, New Tality shall be solely responsible for such Liabilities;
provided, however, that neither of the parties shall be obligated to pay any
consideration therefor to any third party from whom such consents, approvals,
substitutions and amendments are requested.

               (b) Inability to Obtain Novation. If the parties are unable to
obtain, or to cause to be obtained, any such required consent, approval,
release, substitution or amendment, the Partnership shall continue to be bound
by such agreements, leases, licenses and other obligations and, unless
prohibited by law or the terms thereof (except to the extent expressly set forth
in this Agreement), New Tality shall, pay, perform and discharge fully, or cause
to be paid, transferred or discharged all the obligations or other Liabilities
of the Partnership, thereunder from and after the date hereof. Partnership
shall, without further consideration, pay and remit, or cause to be paid or
remitted, to New Tality promptly all money, rights and other consideration
received by it in respect of such performance (unless any such consideration is
an Excluded Asset). If and when any such consent, approval, release,
substitution or amendment shall be obtained or such agreement, lease, license or
other rights or obligations shall otherwise become assignable or able to be
novated, Partnership shall thereafter assign, or cause to be assigned, all its
rights, obligations and other Liabilities thereunder to the New Tality without
payment of further consideration and the New Tality shall, without the payment
of any further consideration, assume such rights and obligations.

        Section 2.4 Issuance and Transfer of New Tality Stock. In consideration
for the assignment and assumption of the Partnership Assets and Partnership
Liabilities subject to the terms and conditions of this Agreement, New Tality
shall issue and transfer all of its authorized capital stock to Tality, LP.

                                   ARTICLE III

                                   LITIGATION

        Section 3.1 Allocation.

               (a) Litigation to Be Transferred to New Tality. The
responsibilities for management of the litigation identified on Schedule 3.1(a)
(the "Litigation Schedule"), are hereby transferred in their entirety from the
Partnership to New Tality. From and after the date hereof , New Tality shall
manage the defense of such litigation. The Partnership must first obtain the
prior consent of New Tality for any action taken subsequent to the date hereof
in connection with the litigation identified in the Litigation Schedule, which
consent cannot be unreasonably withheld or delayed. All other matters relating
to such litigation, including any



                                       10


<PAGE>   13

indemnification for such claims, shall be governed by the provisions of the
Indemnification and Insurance Matters Agreement.

               (b) Litigation to Be Defended by the Partnership at New Tality's
Expense. Partnership shall defend, and shall cause its applicable Subsidiaries
to defend, the litigation identified in the Litigation Schedule that is not
delivered by the Partnership to New Tality on the date hereof. All other matters
relating to such litigation, including indemnification for such claims, shall be
governed by the provisions of the Indemnification and Insurance Matters
Agreement.

        Section 3.2 Cooperation. The parties and their respective Subsidiaries
shall cooperate with each other in the defense of any litigation covered under
this Article III and afford to each other reasonable access upon reasonable
advance notice to witnesses and Information (other than Information protected
from disclosure by applicable privileges) that is reasonably required to defend
this litigation. The foregoing agreement to cooperate includes an obligation to
provide access to qualified assistance to provide information, witnesses and
documents to respond to discovery requests in specific lawsuits. In such cases,
cooperation shall be timely so that the party responding to discovery may meet
all court-imposed deadlines. The party requesting information shall reimburse
the party providing information consistent with the terms of Section 4.2 of the
Separation Agreement. The obligations set forth in this paragraph are more
clearly defined in Section 4.2 of the Separation Agreement.

                                   ARTICLE IV

                                  MISCELLANEOUS

        Section 4.1 Incorporation by Reference. Sections 4.4 and 4.7 and all of
the provisions of Article V of the Separation Agreement (except for Sections
5.13 and 5.15 thereof) are incorporated into and made a part of this Agreement,
as if fully set forth herein.

        Section 4.2 Conflicting Agreements. In the event of any irreconcilable
conflict between this Agreement and the Separation Agreement, any other
Ancillary Agreement (as defined in the Separation Agreement) or other agreement
executed in connection herewith or therewith, the provisions of such other
agreement shall prevail to the extent that they specifically address the subject
matter of the conflict.











                                       11



<PAGE>   14

        WHEREFORE, the parties have executed and delivered this Agreement
effective as of the date first set forth above.

NEW TALITY CORPORATION                 TALITY, LP

By:    /s/ Robert P. Wiederhold        By: TALITY CORPORATION,
Name:  Robert P. Wiederhold                AS GENERAL PARTNER
Title: President and Chief Executive       By:    /s/ Duane W. Bell
       Officer                             Name:  Duane W. Bell
                                           Title: Senior Vice President,
                                                  Chief Financial Officer











                                       12


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.18
<SEQUENCE>4
<FILENAME>f74874ex2-18.txt
<DESCRIPTION>EXHIBIT 2.18
<TEXT>
<PAGE>   1
                                                                   EXHIBIT 2.18

                          MASTER AMENDMENT AND CONSENT

        THIS MASTER AMENDMENT AND CONSENT (this "Amendment") is entered into and
effective as of June 2, 2001 by and among Tality, LP, a Delaware limited
partnership (the "Partnership"), Tality Transition Corporation, a Delaware
corporation ("Tality"), Tality Corporation, a Delaware corporation ("New
Tality"), Cadence Design Systems, Inc. ("Cadence") and Cadence Holdings, Inc.
("Holdings"). Capitalized terms used herein and not defined elsewhere herein
shall have the meanings ascribed to them in the Amended and Restated Master
Separation Agreement.

        WHEREAS, New Tality is acquiring certain assets and liabilities from
Partnership, including rights pursuant to agreements to which Partnership is a
party as reflected in that certain Assignment and Assumption Agreement dated as
of the date hereof (the "Transactions"); and

        WHEREAS, the parties hereto desire to amend certain agreements for the
purpose of making New Tality a party to such agreements subject to the terms and
conditions thereof, and to consent to the Transactions.

        NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:

        Section 1 Separation/Intercompany Agreements. The parties hereby amend
the following agreements dated as of October 4, 2000 by and among Cadence,
Cadence Holdings, Inc., the Partnership, and Tality Corporation (except items
(viii) and (xii), to which the parties were Cadence and the Partnership), as
amended, such that New Tality shall be added as a party to such agreements, with
the effect that New Tality shall have such rights and obligations as those
pertaining to Tality, LP as such rights and obligations relate to the operation
of the U.S. business and the ownership of the assets and liabilities of the
Partnership related to such business:

               (i)   Amended and Restated Master Separation Agreement (the
        "Separation Agreement");

               (ii)   General Assignment and Assumption Agreement;

               (iii)  Real Estate Matters Agreement;

               (iv)   Master Confidentiality Agreement;

               (v)    Indemnity and Insurance Matters Agreement;

               (vi)   Master Intellectual Property Agreement;

               (vii)  Employee Matters Agreement;

               (viii) Loaned Employee Agreement;

               (ix)   Master Corporate Services Agreement;



<PAGE>   2

               (x)    Joint Sales Agreement;

               (xi)   Joint Technology Development and Support Agreement; and

               (xii)  EDA Tools Agreement.

        Section 2 Consent to Transactions, Cooperation. Cadence, Tality, and
Holdings hereby consent to the Transactions as contemplated in the Assignment
and Assumption Agreement. In furtherance of the Transactions, simultaneously
with the execution and delivery hereof or as promptly as practicable thereafter
as necessary, the parties, as applicable, shall deliver, and shall cause their
respective subsidiaries to execute and deliver, such bills of sale, stock
powers, certificates of title, assignments of contracts and other instruments of
transfer, conveyance and assignment as and to the extent necessary to evidence
the transfer, conveyance and assignment contemplated by the Transactions.

        Section 3 Incorporation by Reference. Sections 4.4 and 4.7 and all of
the provisions of Article V of the Separation Agreement (except for Sections
5.13 and 5.15 thereof) are incorporated into and made a part of this Agreement,
as if fully set forth herein.



<PAGE>   3

        WHEREFORE, the parties have executed and delivered this Amendment and
Consent effective as of the date first set forth above.

CADENCE DESIGN SYSTEMS, INC.             CADENCE HOLDINGS, INC.

By:    R. L. Smith McKeithen             By:    R. L. Smith McKeithen
Name:  R. L. Smith McKeithen             Name:  R. L. Smith McKeithen
Title: Senior Vice President and         Title: Secretary
       General Counsel

TALITY CORPORATION                       TALITY, LP

By:    /s/ Robert P. Wiederhold          By: TALITY TRANSITION CORPORATION,
Name:  Robert P. Wiederhold                  AS GENERAL PARTNER
Title: President and Chief Executive         By:    /s/ Duane W. Bell
       Officer                               Name:  Duane W. Bell
                                             Title: Senior Vice President,
                                                    Chief Financial Officer

TALITY TRANSITION CORPORATION

By:    /s/Robert P. Wiederhold
Name:  Robert P. Wiederhold
Title: President and Chief Executive Officer




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.50
<SEQUENCE>5
<FILENAME>f74874ex10-50.txt
<DESCRIPTION>EXHIBIT 10.50
<TEXT>
<PAGE>   1
                                                                   EXHIBIT 10.50

                             TALITY HOLDINGS, INC.

                           2000 EQUITY INCENTIVE PLAN

                    AMENDED AND RESTATED AS OF JULY 26, 2001

1.      PURPOSES.

        (a) AVAILABLE STOCK AWARDS. This Tality Holdings, Inc. 2000 Equity
Incentive Plan (the "Plan") represents the amendment and restatement of the
Tality Corporation 2000 Equity Incentive Plan (the "Former Plan") which,
together with all options outstanding thereunder, is being assumed by Tality
Holdings, Inc., a Delaware corporation (the "Company") in accordance with the
provisions of Section 11 of the Former Plan, as a result of the restructuring of
Tality Corporation and its affiliates ("Tality") pursuant to a series of
transactions whereby the assets and liabilities of Tality have been assumed,
directly or indirectly, by the Company. The purpose of the Plan is to provide a
means by which eligible participants may be given an opportunity to benefit from
increases in value of the Common Stock of the Company and through the granting
of the following Stock Awards: (i) statutory stock options, (ii) non-statutory
stock options, (iii) stock appreciation rights and (iv) restricted stock awards.

        (b) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.

2.      CERTAIN DEFINITIONS.

        (a) "ADMINISTRATOR" means the Committee, and if no Committee is
appointed, the Board.

        (b) "AFFILIATE" means any entity approved by the Board in which the
Company holds an ownership interest (by value or voting rights) of at least 50%,
or any other entity approved by the Board which has an ownership interest (by
value or voting rights) of at least 30% in the Company (a "Parent"), or any
other entity approved by the Board in which a Parent has an ownership interest
(by value or voting rights) of at least 50%; provided that with respect to any
ISO, the term Affiliate shall mean any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.

        (c) "BOARD" means the Board of Directors of the Company.

        (d) "CALIFORNIA COMMISSIONER" means the Commissioner of Corporations of
the State of California.





                                       1


<PAGE>   2

        (e) "CALIFORNIA REGULATED PLAN" means this Plan at any time that Awards
and securities underlying Awards are California Regulated Securities and the
Company relies upon the exemption provided by Section 25102(c) of the California
Securities Law (or another exemption imposing comparable requirements) to exempt
the issuance of securities under this Plan from qualification under the
California Securities Law.

        (f) "CALIFORNIA REGULATED SECURITIES" means Awards and securities
underlying Awards that are subject to the California Securities Law or the
California Securities Rules.

        (g) "CALIFORNIA SECURITIES LAW" means the California Corporate
Securities Law of 1968, as amended.

        (h) "CALIFORNIA SECURITIES RULES" means the Rules of the California
Commissioner adopted under the California Securities Law.

        (i) "CODE" means the Internal Revenue Code of 1986, as amended.

        (j) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).

        (k) "COMMON STOCK" means the Class A Common Stock of the Company.

        (l) "COMPANY" means Tality Holdings, Inc., a Delaware corporation and
the successor in interest to Tality Corporation, a Delaware corporation.

        (m) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services. However, the term "Consultant" shall not include
Directors or members of the Board of Directors of an Affiliate.

        (n) "CONTINUOUS SERVICE" shall mean the absence of any interruption or
termination of service to the Company or an Affiliate, whether as an Employee,
Director or Consultant. The Board or the Chief Executive Officer of the Company
may determine, in that party's sole discretion, whether Continuous Service shall
be considered interrupted in the case of: (i) any leave of absence approved by
the Board or the Chief Executive Officer of the Company, including sick leave,
military leave, or any other personal leave; or (ii) transfers between the
Company, Affiliates or their successors.

        (o) "COVERED PARTICIPANT" means a Participant who is (or, in the
judgment of the Administrator, could reasonably be expected to become) a
"covered employee" defined in Section 162(m)(3) of the Code.

        (p) "DIRECTOR" means a member of the Board of Directors of the Company.

        (q) "EMPLOYEE" means any officer or employee of the Company or an
Affiliate.

        (r) "EMPLOYER" means the Company and any other Affiliate that has
adopted the Plan



                                       2

<PAGE>   3

with the Company's permission.

        (s) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

        (t) "FAIR MARKET VALUE" means, as of any date, the average of the high
and low prices of the Common Stock, as reported on the NASDAQ National Market on
such date, or if such date is not a date on which the Common Stock is traded,
the first preceding trading date. In the absence of such market for the Common
Stock, the Fair Market Value shall be determined in good faith by the Board;
provided, however, that when appropriate, the Board in determining Fair Market
Value of the Common Stock shall consider such factors as may be required by the
California Securities Law and the California Securities Rules while this Plan is
a California Regulated Plan, and may take into account such other factors as it
may deem appropriate under the circumstances.

        (u) "INCENTIVE STOCK OPTION" OR "ISO" means a statutory stock option
granted pursuant to the Plan that is intended to quality as an incentive stock
option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.

        (v) "INITIAL PUBLIC OFFERING" means the effectiveness of a registration
statement under the Securities Act covering any of the capital stock of the
Company and the completion of a sale of such stock thereunder, if as a result of
such sale (i) the issuer becomes a reporting company under Section 12(b) or
12(g) of the Exchange Act, and (ii) such stock is traded on the New York Stock
Exchange or the American Stock Exchange, or is quoted on the Nasdaq Stock Market
or is traded or quoted on any other national stock exchange or securities
system.

        (w) "NON-QUALIFIED STOCK OPTION" OR "NQSO" means a stock option granted
pursuant to the Plan not intended to qualify as an ISO.

        (x) "OFFICER" means any officer of the Company or an Affiliate.

        (y) "OPTION" means an ISO or NQSO.

        (z) "OPTION AGREEMENT" means a written agreement between an Employer and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

        (aa) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.

        (bb) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

        (cc) "PLAN" means this Tality Holdings, Inc. 2000 Equity Incentive Plan.

        (dd) "RESTRICTED STOCK AWARD" means a Stock Award as described in
section 7(b) of the Plan.




                                       3


<PAGE>   4

        (ee) "SECURITIES ACT" means the Securities Act of 1933, as amended.

        (ff) "SHARES" means shares of Common Stock.

        (gg) "STOCK APPRECIATION RIGHT" OR "SAR" means the right to receive an
amount equal to the excess of the Fair Market Value of a Share of Common Stock
(as determined on the date of exercise) over the exercise price of the related
Stock Award.

        (hh) "STOCK AWARD" means any right granted under the Plan, including an
Option, a SAR and a Restricted Stock Award.

        (ii) "STOCK AWARD AGREEMENT" means a written agreement between an
Employer and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

        (jj) "TEN PERCENT OWNER" means a Participant who owns, directly or by
reason of the applicable attribution rules of Code Section 424(d), more than 10%
of the total combined voting power of all classes of capital stock of the
Company or its parent or subsidiary corporations, if any, as defined in Code
Sections 424(e) and (f).

3.      ADMINISTRATION.

        (a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).

        (b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

               (i) To determine from time to time which Employees and/or
Consultants shall be eligible to receive Stock Awards under the Plan; when and
how each Stock Award shall be granted; what type or combination of types of
Stock Award shall be granted; the provisions of each Stock Award granted (which
need not be identical), including the time or times when a Stock Award shall
become vested and/or free of any restrictions; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person. The Board furthermore may delegate to one or more executive officers of
the Company the authority to make Stock Awards to Participants who are not
executive officers of the Company (as designated by the Company or otherwise
covered as such under Rule 16b-3 of the Exchange Act ("Rule 16b-3")) ("Executive
Officers") or Covered Participants. Awards made to the Executive Officers or
Covered Participants shall be determined by the Board or the Committee. The
Board shall also have the authority to establish subplans or other arrangements
not inconsistent with the Plan which the Board deems necessary or advisable to
comply with laws or requirements of foreign jurisdictions.

               (ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any







                                       4



<PAGE>   5

Stock Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective;

               (iii) To amend the Plan or a Stock Award as provided in Section
14; and

               (iv) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company that are not in conflict with the provisions of the Plan.

        (c) DELEGATION TO COMMITTEE. The Board may delegate administration of
the Plan to a Committee or Committees of one (1) or more members of the Board,
and the term "Committee" shall apply to any person or persons to whom such
authority has been delegated. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan. For any Stock Award intended to
qualify as "performance-based compensation "under Code Section 162(m) or as an
exempt award under Rule 16b-3, the Committee shall consist of two or more
"outside directors" as defined for purposes of applying Code Section 162(m), and
two or more "non-employee directors" as defined in Rule 16b-3.

        (d) EFFECT OF ADMINISTRATOR'S DECISION. All determinations,
interpretations and constructions made by the Administrator in good faith shall
not be subject to review by any person and shall be final, binding and
conclusive on all persons.

        (e) INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee or
otherwise, the members of the Committee, and any executive officers to whom the
Committee has delegated any of its rights and responsibilities, shall be
indemnified by the Company against reasonable expenses incurred from their
administration of the Plan, including, without limitation, related attorneys'
fees actually and reasonably incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, and
against all reasonable amounts paid by them in settlement thereof or paid by
them in satisfaction of a judgment in any such action, suit or proceeding, if
such members acted in good faith and in a manner which they believed to be in,
and not opposed to, the best interests of the Employer.

4.      SHARES SUBJECT TO THE PLAN.

        (a) SHARE RESERVE. Subject to the provisions of Section 13 relating to
adjustments upon changes in Common Stock, and Sections 4(b) and 4(d) hereof, the
number of shares of Common Stock with respect to which Stock Awards may be
issued pursuant to the Plan shall not exceed in the aggregate 8,000,000 Shares.




                                       5



<PAGE>   6

        (b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the number of shares of Common Stock with respect
to which the Stock Award was not exercised or settled shall revert to and again
become available for issuance under the Plan. If the Company repurchases any
unvested shares of Common Stock acquired pursuant to an Award, such repurchased
shares of Common Stock shall revert to and again become available for issuance
under the Plan.

        (c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.

        (d) EVERGREEN. The number of Shares reserved under Section 4(a) shall be
increased annually for four (4) years on each July 2, beginning on July 2, 2001
and ending on July 2, 2004, by 2,500,000 Shares per year.

        (e) ANNUAL LIMIT. No Participant under the Plan shall be issued Stock
Awards, whether underlying Options or SARs, or as Restricted Stock Awards, for
more than 5,000,000 Shares in any calendar year.

        (f) ISO LIMITS. Notwithstanding Sections 4(b) and 4(d), the maximum
number of Shares that may be acquired by Participants hereunder pursuant to ISOs
shall not exceed 10,000,000, subject to the provisions of Section 13 relating to
adjustments upon changes in Common Stock.

5.      ELIGIBILITY.

        (a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. The Board may grant Stock
Awards only to Directors, Employees or Consultants as defined in Section 2
hereof. The Board may grant an additional Stock Award or Stock Awards to a
Director, Employee or a Consultant who has been granted a Stock Award previously
if he or she is otherwise eligible. However, only Employees of the Company or
any parent corporation or subsidiary corporation (as those terms are defined in
Code Section 424(e) and (f), respectively) shall be eligible to receive ISOs
under the Plan.

        (b)    CONSULTANTS.

               (i) A Consultant shall not be eligible for the grant of a Stock
Award if, at the time of grant, a Form S-8 Registration Statement under the
Securities Act ("Form S-8") is not available to register either the offer or the
sale of the Company's securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under
Rule 701 of the Securities Act, or any other applicable exemption, in order to
comply with the requirements of the Securities Act (if applicable), and (ii)
that such grant complies with the securities laws of all other relevant
jurisdictions.



                                       6


<PAGE>   7

               (ii) Consultants shall not be eligible to receive ISOs under the
Plan.

        (c) Notwithstanding any other provision of the Plan, the Board or the
Committee may impose such conditions on any Stock Award (including approval of
any Stock Award by the Board of Directors or Compensation Committee of the
Company), and the Board may amend the Plan in any such respects, as may be
required to satisfy the requirements of Rule 16b-3 under the Exchange Act, Code
Section 162(m), or Code Section 422.

6.      OPTION PROVISIONS.

        Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. Options may be granted by the
Company or an Employer directly to a Participant, or may be granted to a
Participant by an Affiliate by way of reassignment of options held by such
Affiliate to purchase Shares of Common Stock of the Company. The provisions of
separate Options need not be identical, but each Option shall state whether it
is intended to be an ISO or NQSO, and shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:

        (a) TERM. The Board shall determine the term of each Option, which shall
not be greater than ten (10) years following the date granted, or five (5) years
for an ISO granted to a Ten Percent Owner. No Stock Award shall be granted later
than 10 years following the Effective Date (as defined in Section 16) of the
Plan.

        (b) EXERCISE PRICE. The exercise price of each Option will be determined
by the Board as of the date such Option is granted. The exercise price of each
Option may be greater or lesser than 100% of the Fair Market Value of the Common
Stock subject to the Option as of the date of grant, provided that the exercise
price of Options that are California Regulated Securities granted while this
Plan is a California Regulated Plan may not be less than 85% of the Fair Market
Value of the Common Stock on the date the Option is granted. In all cases, the
exercise price of ISO's granted to a Ten Percent Owner shall be no less than
110% of the Fair Market Value of the Common Stock as of the date of grant.
Option may also be granted with an exercise price lower than 100% of the Fair
Market Value of the Common Stock if such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.

        (c) NUMBER OF SHARES. Each Option shall state the number of Shares to
which it pertains.

        (d) ISOs. To the extent that the aggregate Fair Market Value (determined
as of the date of grant) of Common Stock with respect to which ISOs are
exercisable for the first time by any Optionholder in any calendar year (under
all plans of the Employer and its parent or subsidiary corporations) exceeds
$100,000, such Options shall be treated as NQSOs. In addition, no Options shall
be deemed ISOs hereunder unless the Plan is approved by the stockholders of the
Company within 12 months before or after the Effective Date.

        (e) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an




                                       7

<PAGE>   8

Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option or
subsequently (1) by delivery to the Company of other Common Stock, (2) according
to a deferred payment or other similar arrangement with the Optionholder or (3)
in any other form of legal consideration that may be acceptable to the Board.
Unless otherwise specifically provided in the Option, the purchase price of
Common Stock acquired pursuant to an Option that is paid by delivery to the
Company of other Common Stock acquired, directly or indirectly from the Company,
shall be paid only by shares of the Common Stock of the Company that have been
held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes). At
any time that the Company is incorporated in Delaware, payment of the Common
Stock's "par value," as defined in the Delaware General Corporation Law, shall
not be made by deferred payment. In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.

        In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

        (f) TRANSFERABILITY. Unless otherwise provided in the Agreement, an
Option shall not be transferable by the Optionholder other than by will or by
the laws of descent and distribution or, except with respect to ISOs, a domestic
relations order; provided, however, that the designation of a beneficiary of an
Option by an Optionholder shall not be deemed a transfer prohibited by this
Section. Notwithstanding the foregoing, to the extent specifically provided for
in the applicable option agreement, transfers of NQSOs may be made with the
prior approval of the Committee and on such terms and conditions as the
Committee in its sole discretion shall approve, to the following permitted
transferees: (a) in the case of a transfer without the payment of any
consideration, any "family member" as such term is defined in Section 1(a)(5) of
the General Instructions to Form S-8 under the Securities Act as in effect at
the time of such transfer, (b) to any person or entity described in clause (ii)
of Section 1(a)(5) of the General Instructions to Form S-8 under the Securities
Act as in effect at the time of such transfer, and (iii) upon an Optionholder's
death, Optionholder's executors, administrators, testamentary trustees, legatees
and beneficiaries. Further, no right or interest of any Optionholder in an
Option may be assigned in satisfaction of any lien, obligation, or liability of
the Optionholder. Except as provided in this Section, an Option shall be
exercisable, during the Optionholder's lifetime, only by such Optionholder (or
by his or her legal representative) and no Option shall be assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise) or be subject
to execution, attachment, or similar process. Any attempted transfer,
assignment, pledge, hypothecation, or other disposition of any Option or of any
rights granted thereunder contrary to the provisions of this Plan, or the levy
of any attachment or similar process upon an Option, shall be null and void.

        (g) VESTING. The total number of Shares of Common Stock subject to an
Option may, but need not, vest and therefore become exercisable in periodic
installments that may, but need not, be equal. The Option may be subject to such
other terms and conditions on the time or times



                                       8

<PAGE>   9


when it may be exercised (which may be based on performance or other criteria)
as the Board may deem appropriate. The vesting provisions of individual Options
granted to Officers and Directors may vary. To the extent necessary to comply
with the California Securities Law, options granted to Optionholders other than
Directors or Officers of the Company, that are California Regulated Securities
granted while this Plan is a California Regulated Plan, will vest and become
exercisable at a minimum of the rate of at least 20% per year over five years
from the date of grant, subject to such other terms and conditions as are deemed
reasonable by the Board. Such provisions may furthermore provide for accelerated
vesting in the event the Participant takes one or more actions and/or meets
various performance criteria within a stated period of time or by a date
certain. The provisions of this subsection 6(g) are subject to any Option
provisions governing the minimum number of Shares of Common Stock as to which an
Option may be exercised.

        (h) TERMINATION OF CONTINUOUS SERVICE.

               (i) FOR CAUSE. Except as otherwise provided in an Option
Agreement, if an Optionholder's Continuous Service if terminated for cause (as
hereinafter defined), all outstanding and unexercised Options shall immediately
be terminated as of the date such Optionholder is notified that his or her
Continuous Service is terminated for cause.

               (ii) NOT FOR CAUSE. In the event an Optionholder's Continuous
Service terminates (other than for cause, or upon the Optionholder's death or
disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement, except that if the Options are California Regulated Securities
while this Plan is a California Regulated Plan, the period of time in which to
exercise the Options must be no less than thirty (30) days from the date of
termination for reasons other than for Cause. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate.

               (iii) DEFINITION OF CAUSE. The Company or an Affiliate shall have
"cause" to terminate the Continuous Service of an Optionholder upon any of the
following: (A) a material breach by an Optionholder of this Agreement or any
written confidentiality or trade secrets agreement entered into between
Optionholder and the Company or any Affiliate; (B) any act of theft,
misappropriation, embezzlement, intentional fraud or other violation of the law
or similar conduct by the Optionholder involving the Company or any Affiliate;
(C) a conviction or a plea of nolo contendere or the equivalent in respect of a
felony involving an act of dishonesty, moral turpitude, deceit or fraud by
Optionholder; (D) any damage of a material nature to the business or property of
the Company or any Affiliate caused by the Optionholder's willful or grossly
negligent conduct; (E) the willful failure by Optionholder to perform reasonable
duties, responsibilities or instructions from the Company's Board of Directors
or other officers or management of the Company or its Affiliates that the
Optionholder reports to, after fifteen (15)




                                       9



<PAGE>   10

days written notice thereof; or (F) any act of dishonesty or misconduct by
Optionholder in connection with his or her Continuous Service or otherwise.
Notwithstanding the foregoing, any definition of "cause" in a written agreement
between an Optionholder and the Company or an Affiliate, which contains a
conflicting definition of "cause" for termination and which is in effect at the
time of such termination, shall supersede the definition in this Plan with
respect to such Optionholder.

        (i) EXTENSION OF TERMINATION DATE. Solely with respect to a NQSO, an
Optionholder's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionholder's Continuous Service (other
than upon the Optionholder's death or disability) would be prohibited at any
time solely because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the expiration of a period of three (3) months after the
termination of the Optionholder's Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.

        (j) DISABILITY OF OPTIONHOLDER. Except as otherwise set forth in an
Option Agreement, in the event that an Optionholder's Continuous Service
terminates as a result of the Optionholder's disability, the Optionholder may
exercise his or her Option (to the extent that the Optionholder was entitled to
exercise such Option as of the date of termination), but only within such period
of time ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option Agreement
for termination upon disability) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement, except that if the Option is a
California Regulated Security granted while this Plan is a California Regulated
Plan, the period of time in which to exercise the Option must be no less than
six (6) months from the date of disability, but such term is still subject to
the expiration of the Option. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.

        (k) DEATH OF OPTIONHOLDER. Except as otherwise set forth in an Option
Agreement, in the event (i) an Optionholder's Continuous Service terminates as a
result of the Optionholder's death or (ii) the Optionholder dies within the
period (if any) specified in the Option Agreement after the termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the Option upon the Optionholder's death pursuant
to subsection 6(f), but only within the period ending on the earlier of (1) the
date twelve (12) months following the date of death (or such longer or shorter
period specified in the Option Agreement for termination upon death) or (2) the
expiration of the term of such Option as set forth in the Option Agreement,
except that if the Option is a California Regulated Security granted while this
Plan is a California Regulated Plan, the period of time in which to exercise the
Option must be no less than six (6) months from the date of death, but such term
is still subject to the expiration of the Option. If, after death, the Option is
not exercised within the time specified herein, the Option shall terminate.





                                       10


<PAGE>   11

        (l) EARLY EXERCISE. The Option Agreement may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder's Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the
full vesting of the Option. Any unvested shares of Common Stock so purchased
shall be subject to a repurchase option in favor of the Company or to any other
additional restrictions the Board determines to be appropriate.

        (m) RE-LOAD OPTIONS.

               (i) Without in any way limiting the authority of the Board to
make or not to make grants of Options hereunder, the Board shall have the
authority (but not an obligation) to include as part of any Option Agreement a
provision entitling the Optionholder to a further Option (a "Re-Load Option") in
the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Unless otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).

               (ii) Any such Re-Load Option shall (1) provide for a number of
shares of Common Stock equal to the number of shares of Common Stock surrendered
as part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.

               (iii) There shall be no Re-Load Options granted with respect to a
Participant's exercise of a Re-Load Option. Any such Re-Load Option shall be
subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and shall be subject to such other terms and conditions as the
Board may determine which are not inconsistent with the express provisions of
the Plan regarding the terms of Options.

7.      PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

        (a) GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
provisions of the Plan and applicable law, the Board, at any time and from time
to time, may grant freestanding Stock Appreciation Rights, Stock Appreciation
Rights in tandem with an Option, or Stock Appreciation Rights in addition to an
Option. Stock Appreciation Rights granted in tandem with an Option or in
addition to an Option may be granted at the time the Option is granted or at a
later time. No Stock Appreciation Rights granted under the Plan may be
exercisable after the expiration of ten years from the grant date.



                                       11


<PAGE>   12

               (i) EXERCISE PRICE. The exercise price of each Stock Appreciation
Right shall be determined on the grant date by the Board. The exercise price of
each Stock Appreciation Right may be greater or lesser than 100% of the Fair
Market Value of the Common Stock subject to the Option as of the date of grant,
provided that the exercise price of Stock Appreciation Rights that are
California Regulated Securities granted while this Plan is a California
Regulated Plan may not be less than 85% of the Fair Market Value of the Common
Stock on the date the Stock Appreciation Right is granted. In all cases, the
exercise price shall be no less than 110% of the Fair Market Value of the Common
Stock in the case of Stock Appreciation Rights granted to a Ten Percent Owner.
Stock Appreciation Rights issued upon assumption of, or in substitution for,
stock appreciation rights of a company with which the Company or an Affiliate
participates in an acquisition, separation or similar corporate transaction may
also be issued at an Exercise Price less than 100% of the Fair Market Value .

               (ii) EXERCISE. The Participant is entitled to receive an amount
equal to the excess of the Fair Market Value over the Exercise Price thereof on
the date of exercise of the Stock Appreciation Right.

               (iii) PAYMENT. Payment upon exercise of the Stock Appreciation
Right shall be made in the form of cash, Shares (valued at Fair Market Value on
the date of exercise), or a combination thereof, as determined in the sole and
complete discretion of the Committee. However, if any payment in the form of
Shares results in a fractional share, the payment for the fractional share shall
be made in cash.

        (b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

               (i) PURCHASE PRICE. The purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement.

               (ii) CONSIDERATION. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.

               (iii) VESTING. Shares of Common Stock acquired under the
restricted stock purchase agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance with a vesting schedule
to be determined by the Board.




                                       12


<PAGE>   13

               (iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the
event a Participant's Continuous Service terminates, the Company may repurchase
or otherwise reacquire any or all of the Shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement. If the Shares of repurchased Common
Stock are California Regulated Securities issued while this Plan is a California
Regulated Plan, the amount of the repurchase price will comply with the
"reasonableness" requirement as defined by the California Securities Law and
California Securities Rules.

               (v) TRANSFERABILITY. Rights to acquire Shares of Common Stock
under the restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase
agreement.

8.      LOCK-UP AGREEMENTS

        Each option agreement shall provide that, in connection with any public
 offering by the Company of its equity securities, any shares of Common Stock
 acquired or that may be acquired upon exercise or vesting of a stock option may
 not be sold, offered for sale, encumbered, or otherwise disposed of or
 subjected to any transaction that will involve any sales of securities of the
 Company, without the prior written consent of the Company or such underwriter,
 as the case may be, for a period of 180 days after the effective date of the
 registration statement for such public offering. Any attempted transfer in
 violation of this Section 8 shall be null and void.

9.      RIGHT OF FIRST REFUSAL.

        (a) OFFER OF SALE; NOTICE OF PROPOSED SALE. If at any time an
Optionholder desires to sell, transfer or otherwise dispose of any Shares or any
interest in such Shares, the Optionholder shall deliver written notice of his or
her desire to do so (the "Sale Notice") to the Company, which Sale Notice must
be accompanied by a binding agreement (the "Binding Agreement"), which Binding
Agreement shall be expressly subject to the Optionholder's compliance with the
provisions of this Agreement, including this Section 9, with a bona fide
purchaser reasonably capable of completing such purchase (the "Proposed
Transferee"). The Sale Notice and Binding Agreement shall specify (i) the name
and address of the Proposed Transferee(s), (ii) the number of Shares the
Optionholder proposes to sell, transfer or otherwise dispose of (referred to
herein as "Offered Shares"), (iii) the consideration per Offered Share to be
delivered to the Optionholder for the proposed sale, transfer or disposition and
(iv) all other material terms and conditions of the proposed transaction.

        (b) OPTION TO PURCHASE.

               (i) The Company shall have the option to purchase all or any
portion of the Offered Shares for the consideration per share and on the terms
and conditions set forth in the Sale Notice. The Company may only exercise such
option by delivery of written notice to the Optionholder prior to the date ten
(10) days after the date of delivery of the Sale Notice.






                                       13


<PAGE>   14

               (ii) If the Company delivers written notice of its intent to
purchase all or any portion of the Offered Shares, then the closing of the
purchase of the Offered Shares by the Company shall take place at the offices of
the Company no later than ten (10) days after the expiration of the applicable
ten (10) day period.

        (c) Form of Consideration. To the extent that the consideration proposed
to be paid by the Proposed Transferee for the Offered Shares consists of
property other than cash or a promissory note (the "Non-Cash Consideration"),
the consideration required to be paid by the Company exercising its options
under this Section 9 may consist of cash equal to the value of the Non-Cash
Consideration, as determined in good faith by the Company's Chief Executive
Officer or Chief Financial Officer. Notwithstanding anything to the contrary set
forth above, the ten (10) day period described in Section 9(b)(i) shall commence
when the value of the Non-Cash Consideration is determined pursuant to this
Section 9(c).

        (d) SALES TO PROPOSED TRANSFEREE. To the extent the Company fails (i) to
deliver written notice or notices of intent to purchase any of the Offered
Shares within the ten (10) day period specified in Section 9(b)(i) or (ii) to
close the purchase of the Offered Shares within the applicable period specified
in Section 9(b)(ii), then the Optionholder may sell, transfer or otherwise
dispose of the remaining Offered Shares to the Proposed Transferee at any time
within fifty (50) days after the date of the delivery of the Sale Notice on the
terms set forth in the Sale Notice and Binding Agreement. Any Offered Shares not
sold, transferred or otherwise disposed of within the applicable fifty (50) day
period and any proposed transfer on terms more favorable to the Proposed
Transferee than those described in the Sale Notice shall continue to be subject
to all of the requirements of this Section 9 as if there had been no prior offer
or Sale Notice. Notwithstanding the above, the Offered Shares shall not be sold,
transferred or otherwise disposed of unless such purchaser or acquiror is bound
or agrees in writing to be bound by the provisions of this Plan and the option
agreement (and, if the purchaser or acquiror is an entity, such other terms
reasonably imposed by the Company that are intended to circumvent avoidance of
these provisions by means of an indirect transfer of the Shares), and any such
sale, transfer or disposition where such purchaser or acquiror is not bound or
does not so agree to be bound shall be void.

        (e) PERMITTED TRANSFERS. Notwithstanding anything to the contrary set
forth herein, to the extent specifically so provided in the applicable stock
option agreement, the provisions of this Section 9 shall not apply to any
transfer or distribution by an Optionholder of Shares to: (a) a trust or similar
entity directly or indirectly controlled by the Optionholder primarily for
estate planning purposes, (b) the Optionholder's heirs, executors,
administrators or beneficiaries upon the Optionholder's death, and (c) a spouse,
sibling, parent or child, or to the spouse, sibling, parent or child of any such
persons, or to a trust or similar entity of which such persons are the
beneficiaries for estate planning purposes or domestic relations order issued by
any court or other governmental or administrative body; provided, however, in
the case of any such transfer that such transferee or distributee agrees in
writing to comply with the provisions of this Agreement.




                                       14


<PAGE>   15

        (f) EFFECT OF NOT FOLLOWING PROCEDURES. Any sale, transfer or other
disposition of Shares not in accordance with the foregoing procedures of this
Section 9 shall be null and void and of no force or effect.

        (g) TERMINATION. The provisions of this Section 9 shall terminate upon
consummation of an initial public offering of the Company.

10.     COVENANTS OF THE COMPANY.

        (a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of Shares of Common Stock
required to satisfy such Stock Awards.

        (b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell Shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.

11.     USE OF PROCEEDS FROM STOCK.

        Proceeds from the sale of Common Stock pursuant to Stock Awards shall be
used in any manner the Company deems appropriate.

12.     MISCELLANEOUS.

        (a) PROVISION OF INFORMATION. The Board in its sole discretion may
determine what, if any, financial and other information is to be provided to
Optionholders and when such financial and other information is to be provided
after giving consideration to applicable federal and state laws, rules and
regulations, including, without limitation, applicable federal and state
securities laws, rules and regulations, provided that during such times as this
Plan is a California Regulated Plan, holders of California Regulated Securities
will receive financial statements of the Company on an annual basis.

        (b) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest,
and such acceleration may be contingent upon the happening of any event or the
taking of any action as specified in the Board within its complete discretion.





                                       15


<PAGE>   16

        (c) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any Shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

        (d) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, or (ii) the service
of a Consultant pursuant to the terms of such Consultant's agreement with the
Company or an Affiliate.

        (e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.

        (f) TAX OBLIGATIONS. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any foreign, federal, state or
local tax withholding obligation or other tax obligation relating to the
exercise or acquisition of Common Stock under a Stock Award by any of the
following means (in addition to the Company's right to withhold from any
compensation paid to the Participant by the Company) or by a combination of such
means: (i) tendering a cash payment; (ii) authorizing the Company to withhold
Shares from the Shares otherwise issuable to the Participant as a result of the
exercise or acquisition of Common Stock under the Stock Award, provided,
however, that no Shares are withheld with a value exceeding the minimum amount
of tax required to be withheld by law; or (iii) delivering to the Company owned
and unencumbered Shares.

        (g) ISSUANCES OF SECURITIES. Except as expressly provided herein or in
the applicable



                                       16



<PAGE>   17

Stock Award Agreement, 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 subject to Stock Awards. Except as expressly provided
herein or in the applicable Stock Award Agreement, no adjustments shall be made
for dividends paid in cash or in property (including without limitation,
securities) of the Company.

        (h) FRACTIONAL SHARES. No fractional Share shall be issued under the
Plan and the person exercising such right shall receive from the Employer cash
in lieu of such fractional share equal to the Fair Market Value thereof.

        (i) NATURE OF PAYMENTS. All Stock Awards shall constitute a special
incentive payment to the Participant and shall not be taken into account in
computing the amount of salary or compensation of the Participant for the
purpose of determining any benefits under any pension, retirement,
profit-sharing, bonus, life insurance, or other benefit plan of the Employer or
under any agreement between the Employer and the Participant, unless such plan
or agreement specifically provides otherwise.

13.     ADJUSTMENTS UPON CHANGES IN STOCK.

        (a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to Section 4, and outstanding Stock Awards will be appropriately
adjusted in the class(es) and number of securities and price per share of Common
Stock subject to such outstanding Stock Awards. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a transaction "without receipt of consideration" by the Company.)

        (b)    CHANGE IN CONTROL.

               (i) A "Change in Control" shall be deemed to occur upon the
consummation of any one of the following events: (a) a sale of all or
substantially all of the assets of the Company; (b) a merger or consolidation in
which the Company is not the surviving corporation (other than a transaction the
principal purpose of which is to change the state of the Company's incorporation
or a transaction in which the voting securities of the Company are exchanged for
beneficial ownership of at least a majority of the voting securities of the
controlling acquiring corporation); (c) a merger or consolidation in which the
Company is the surviving corporation and less than a majority of the voting
securities of the Company that are outstanding immediately after the
consummation of such transaction are beneficially owned, directly or indirectly,
by the persons who owned such voting securities immediately prior to such
transaction; (d) any transaction or series of related transactions after which
any person (as such term is used in



                                       17


<PAGE>   18

Section 13(d)(3) of the Exchange Act), other than any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Affiliate, becomes
the beneficial owner of voting securities of the Company representing a majority
of the combined voting power of all of the voting securities of the Company;
provided, however, that so long as Cadence Design Systems, Inc., a Delaware
corporation, or its affiliates other than the Company (collectively, "Cadence"),
own any voting securities of the Company and no other Change in Control has
occurred, acquisition of any amount of voting securities of the Company by
Cadence or its Affiliates shall not constitute a "Change in Control" hereunder;
(e) during any period of two consecutive years, individuals who at the beginning
of such period constitute the membership of the Company's Board of Directors
("Incumbent Directors") cease for any reason to have authority to cast at least
a majority of the votes which all directors are entitled to cast, unless the
election, or the nomination for election by the Company's stockholders, of a new
Director was approved by a vote of at least two-thirds of the votes entitled to
be cast by the Incumbent Directors, in which case such Director shall also be
treated as an Incumbent Director in the future; or (f) the liquidation or
dissolution of the Company.

               (ii) In the event of a Change in Control, then: (a) any surviving
or acquiring corporation shall assume Stock Awards outstanding under the Plan or
shall substitute similar Stock Awards (including an option to acquire the same
consideration paid to stockholders in the transaction described in this
subsection 13(b) for those outstanding under the Plan), or (b) in the event any
surviving or acquiring corporation refuses to assume such Stock Awards or to
substitute similar Stock Awards for those outstanding under the Plan, (i) with
respect to Stock Awards held by persons whose Continuous Service has not
terminated, the vesting both of such Stock Awards and of any shares of Common
Stock acquired pursuant to a Stock Award as well as the time during which such
Stock Awards may be exercised shall be accelerated prior to such event and the
Stock Awards terminated if not exercised after such acceleration and at or prior
to such event, and (ii) with respect to any other Stock Awards outstanding under
the Plan, if there is a successor corporation, such Stock Awards shall be
terminated if not exercised prior to such event.

        (c) Notwithstanding anything else contained herein to the contrary, in
no event shall a Change in Control be deemed to occur solely by reason of (1) a
distribution to the direct and/or indirect stockholders of any Affiliate,
whether as dividend or otherwise, of all or any portion of the Shares held,
directly or indirectly, by such Affiliate; (2) a sale of all or any portion of
the Shares held, directly or indirectly, by any Affiliate in an underwritten
public offering (including, without limitation, a sale of securities of the
Company in an underwritten public offering); or (3) any Person (the "Subject
Person") acquiring beneficial ownership of more than the permitted amount of the
then outstanding voting securities as a result of the acquisition of Shares by
the Company or Affiliate which, by reducing the number of Shares then
outstanding, increases the percentage of Shares beneficially owned by the
Subject Person, provided that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Shares by the
Company or an Affiliate, and after such Share acquisition by the Company or an
Affiliate, the Subject Person becomes the beneficial owner of any additional
Shares which further increases the percentage of the then outstanding Shares
beneficially owned by the Subject Person, then a Change in Control shall occur.


                                       18


<PAGE>   19

        (d) Notwithstanding the foregoing, any adjustments made pursuant to
subsection (a) above with respect to ISOs shall be made only after the
Administrator determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424(h) of the
Code). If the Administrator determines that such adjustments made with respect
to ISOs would constitute a modification of such ISOs, it may refrain from making
such adjustments, unless the holder of an ISO specifically requests in writing
that such adjustment be made and such writing indicates that the holder has full
knowledge of the consequences of such "modification" on his or her income tax
treatment with respect to the ISO.

14.     AMENDMENT OF THE PLAN AND STOCK AWARDS.

        (a) AMENDMENT OF PLAN. The Plan may be amended by the Board, including,
without limitation, to the extent necessary to ensure the qualification of any
Award under Rule 16b-3 or Code Section 162(m), or any ISO under Code Section
422, and to the extent necessary to qualify the Shares issuable upon exercise of
any outstanding Stock Awards granted, or Stock Awards to be granted, under the
Plan for listing on any national securities exchange or quotation in any
national automated quotation system of securities dealers. Any amendment that
requires shareholder approval under applicable law or in order to ensure
favorable federal income tax treatment for any ISOs shall be subject to
obtaining such approval.

        (b) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

        (c) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights of a Participant under any Stock Award shall not be impaired by
any such amendment unless (i) the Company requests the consent of the
Participant and (ii) the Participant consents in writing.

15.     TERMINATION OR SUSPENSION OF THE PLAN.

        (a) PLAN TERM. The Plan shall terminate as of July 13, 2010, the date
that is ten (10) years following the earlier of the date the Plan was adopted by
the Company or approved by the shareholders of the Company. The Board may
furthermore suspend or terminate the Plan at any time.

        (b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.

16.     EFFECTIVE DATE OF PLAN.

        The Former Plan became effective on July 13, 2000, the date on which it
was approved by the Board. This amended and restated Plan is effective as of
July 26, 2001.

17.     GOVERNING LAW.





                                       19


<PAGE>   20

        The Plan shall be governed by laws of the state of Delaware, without
giving effect to the principles of the conflicts of laws thereof, provided that
this will not be construed to apply the California Securities Law or the
California Securities Rules to securities or holders thereof to which the
California Securities Law or California Securities Rules would not otherwise
apply. In the event any provision of the Plan shall be held invalid, illegal or
unenforceable, in whole or in part, for any reason, such determination shall not
affect the validity, legality or enforceability of any remaining provision,
portion of provision or the Plan overall, which shall remain in full force and
effect as if the Plan had been absent the invalid, illegal or unenforceable
provision or portion thereof.

18.     CERTAIN PARTICIPANTS.

        All Stock Award Agreements with Participants subject to Section 16(b) of
the Exchange Act shall be deemed to include any such additional terms,
conditions, limitations and provisions as Rule 16b-3 requires, unless the
Administrator in its discretion determines that any such Stock Award should not
be governed by Rule 16b-3. To the extent any provision of the Plan or any action
by the Administrator fails to so comply with Rule 16b-3, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Administrator. All performance-based Stock Awards to Covered Participants shall
be deemed to include any such additional terms, conditions, limitations and
provisions as are necessary to comply with the performance-based compensation
exception of Section 162(m) of the Code unless the Administrator in its
discretion determines that any such Award to a Covered Participant is not
intended to qualify for the exception for performance-based compensation under
Section 162(m). All Agreements awarding ISOs shall be deemed to include any such
additional terms conditions, limitations, and provisions as Code Section 422
requires unless the Administrator in its discretion determines that any such
Option is not intended or is no longer intended to qualify as an ISO.

19.     LISTING, REGISTRATION AND OTHER LEGAL COMPLIANCE.

        Notwithstanding any other provision of this Plan, no Stock Awards or
Shares of the Common Stock shall be required to be issued or granted under the
Plan unless legal counsel to the Company shall be satisfied that such issuance
or grant will be in compliance with all applicable federal and state securities
laws and regulations and any other applicable laws or regulations. The
Administrator may require, as a condition of any payment or share issuance, that
certain agreements, undertakings, representations, certificates, and/or
information, as the Administrator may deem necessary or advisable, be executed
or provided to the Company to assure compliance with all such applicable laws or
regulations. Any certificates for Shares of the Common Stock delivered under the
Plan may be subject to such legends, stock-transfer orders and such other
restrictions as the Administrator may deem advisable under the rules,
regulations, or other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed, the NASDAQ
National Market System, and any applicable federal or state securities law. In
addition, if, at any time specified herein (or in any Agreement or otherwise)
for (a) the making of any Stock Award, or the making of any determination, (b)
the issuance or other distribution of Common Stock, or (c) the payment of
amounts to or through a Participant with respect to any Stock Award, any law,
rule, regulation,




                                       20

<PAGE>   21

or other requirement of any governmental authority or agency shall require the
Company or any Affiliate, or any Participant (or any estate, designated
beneficiary, or other legal representative thereof) to take any action in
connection with any such determination, any such Shares to be issued or
distributed, any such payment, or the making of any such determination, as the
case may be, shall be deferred until such required action is taken.
































                                       21




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.51
<SEQUENCE>6
<FILENAME>f74874ex10-51.txt
<DESCRIPTION>EXHIBIT 10.51
<TEXT>
<PAGE>   1
                                                                  Exhibit 10.51

                             TALITY HOLDINGS, INC.

                        2000 DIRECTORS STOCK OPTION PLAN

             AS AMENDED AND RESTATED EFFECTIVE AS OF JULY 26, 2001

1.      PURPOSE

        This Tality Holdings, Inc. 2000 Directors Stock Option Plan (the "Plan")
        represents the amendment and restatement of the Tality Corporation 2000
        Directors Stock Option Plan (the "Former Plan") which, together with all
        options outstanding thereunder, is being assumed by Tality Holdings,
        Inc., a Delaware corporation (the "Company") in accordance with the
        provisions of Section 9 of the Former Plan, as a result of the
        restructuring of Tality Corporation and its affiliates ("Tality")
        pursuant to a series of transactions whereby the assets and liabilities
        of Tality have been assumed, directly or indirectly, by the Company. The
        purpose of the Plan is to advance the interests of the Company by
        enabling it to attract, retain and motivate qualified individuals to
        serve on the Company's Board of Directors and to align the financial
        interests of such individuals with those of the Company's stockholders
        by providing for or increasing their proprietary interest in the
        Company. The stock options granted pursuant to this Plan are not
        qualified under Section 422 of the Internal Revenue Code of 1986, as
        amended (the "Code").

2.      DEFINITIONS

        (a) "BOARD" means the Board of Directors of the Company.

        (b) "CALIFORNIA COMMISSIONER" means the Commissioner of Corporations of
the State of California.

        (c) "CALIFORNIA REGULATED PLAN" means this Plan at any time that Awards
and securities underlying Awards are California Regulated Securities and the
Company relies upon the exemption provided by Section 25102(o) of the California
Securities Law (or another exemption imposing comparable requirements) to exempt
the issuance of securities under this Plan from qualification under the
California Securities Law

        (d) "CALIFORNIA REGULATED SECURITIES" means Awards and securities
underlying Awards that are subject to the California Securities Law or the
California Securities Rules.

        (e) "CALIFORNIA SECURITIES LAW" means the California Corporate
Securities Law of 1968, as amended.

        (f) "CALIFORNIA SECURITIES RULES" means the Rules of the California
Commissioner adopted under the California Securities Law.




                                      -1-



<PAGE>   2

                                                                  Exhibit 10.51


        (g) "COMMITTEE" means the Board and/or a committee of the Board acting
pursuant to its authorization to administer this Plan under Section 9.

        (h) "COMMON STOCK" means the Company's Class A Common Stock, as
presently constituted, subject to adjustment as provided in Section 11.

        (i) "FAIR MARKET VALUE" means, as of any date, the mean average of the
high and low prices of the Common Stock for each of the last 20 trading days
prior to the such date on the national securities exchange, national market
system or other trading market on which the Common Stock has the highest average
trading volume; or, in the absence of such market for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board; provided, however,
that when appropriate, the Board in determining Fair Market Value of the Common
Stock shall consider such factors as may be required by the California
Securities Law and the California Securities Rules while this Plan is a
California Regulated Plan, and may take into account such other factors as it
may deem appropriate under the circumstances.

        (j) "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not at
the time also an employee of the Company or any of its direct or indirect
majority-owned subsidiaries (regardless of whether such subsidiary is organized
as a corporation, partnership or other entity). For purposes of this Plan, the
Chairman of the Board's status as an employee shall be determined by the Board.

        (k) "TEN PERCENT OWNER" means a Participant who owns, directly or by
reason of the applicable attribution rules of Code Section 424(d), more than 10%
of the total combined voting power of all classes of capital stock of the
Company or its parent or subsidiary corporations, if any, as defined in Code
Sections 424(e) and (f).

3.      SHARES SUBJECT TO THE PLAN

        Subject to adjustment as provided in Section 11, the maximum number of
        shares of Common Stock which may be issued pursuant to this Plan shall
        not exceed Six Hundred Seventy-Five Thousand (675,000) Shares issued
        under this Plan may be authorized and unissued shares of Common Stock or
        shares of Common Stock reacquired by the Company. All or any shares of
        Common Stock subject to a stock option which for any reason are not
        issued or are reacquired under the stock option may again be made
        subject to a stock option under the Plan.

4.      PARTICIPANTS

        Any person who is a Non-Employee Director shall be eligible for the
        award of stock options hereunder. Non-Employee Directors who are granted
        stock options hereunder shall be referred to as "Participants."

5.      NON-EMPLOYEE DIRECTOR AWARDS




                                      -2-


<PAGE>   3

                                                                  Exhibit 10.51

        (a) Each person who becomes a Non-Employee Director during any calendar
        year shall, upon election to the Board, automatically be granted an
        option to purchase 50,000 shares of Common Stock. If such person is also
        elected as the Chairman of the Board, such person shall, upon election
        as Chairman of the Board, automatically be granted an additional option
        to purchase 50,000 shares of Common Stock.

        (b) Other than the calendar year in which such person becomes a
        Non-Employee Director, each Non-Employee Director, on July 1 of each
        calendar year, beginning July 1, 2001, shall automatically be granted an
        option to purchase 12,500 shares of Common Stock. In addition, if such
        Non-Employee Director is serving as Chairman of the Board, such
        Non-Employee Director shall automatically be granted an option to
        purchase an additional 12,500 shares of Common Stock.

6.      TERMS AND CONDITIONS OF STOCK OPTIONS

        (a) General Terms and Conditions: Stock options awarded pursuant to the
        Plan need not be identical but each stock option shall be subject to the
        following general terms and conditions:

               (1) Terms and Restrictions Upon Shares: The Board may provide
               that the shares of Common Stock issued upon exercise of a stock
               option shall be subject to such further conditions, restrictions
               or agreements as the Board in its discretion may specify prior to
               the exercise of such stock option, including without limitation,
               deferrals on issuance, conditions on vesting or transferability,
               and forfeiture or repurchase provisions. The Committee may
               establish rules for the deferred delivery of Common Stock upon
               exercise of a stock option with the deferral evidenced by use of
               "Stock Units" equal in number to the number of shares of Common
               Stock whose delivery is so deferred. A "Stock Unit" is a
               bookkeeping entry representing an amount equivalent to the Fair
               Market Value of one share of Common Stock. Stock Units represent
               an unfunded and unsecured obligation of the Corporation except as
               otherwise provided by the Board. Settlement of Stock Units upon
               expiration of the deferral period shall be made in Common Stock
               or otherwise as determined by the Committee. The amount of Common
               Stock, or other settlement medium, to be so distributed may be
               increased by an interest factor or by dividend equivalents. Until
               a Stock Unit is settled, the number of shares of Common Stock
               represented by a Stock Unit shall be subject to adjustment
               pursuant to Section 11.

               (2) Transferability of Option: Unless otherwise specifically
               provided by the Committee and the applicable option agreement,
               each stock option shall be transferable only by will or the laws
               of descent and distribution. Notwithstanding the foregoing, a
               stock option that is a California Regulated Security granted at
               any time that this Plan is a California Regulated Plan may not be
               transferred other than by will or the laws of descent or
               distribution.



                                      -3-


<PAGE>   4

                                                                  Exhibit 10.51

               (3) Vesting: Options granted pursuant to Section 5 shall vest
               over a four-year period, with 25% of the option vesting on the
               first through fourth anniversaries of the date of grant of such
               option.

               (4) Other Terms and Conditions: No holder of a stock option shall
               have any rights as a stockholder with respect to any shares of
               Common Stock subject to a stock option hereunder until said
               shares have been issued. Stock options may also contain such
               other provisions, which shall not be inconsistent with any of the
               foregoing terms, as the Board or the Committee shall deem
               appropriate. The Board may waive conditions to and/or accelerate
               exercisability of a stock option, either automatically upon the
               occurrence of specified events (including in connection with a
               change of control of the Company) or otherwise in its discretion.
               No stock option, however, nor anything contained in the Plan,
               shall confer upon any Participant any right to serve as a
               director of the Company.

        (b) Stock Option Price: The exercise price for each stock option shall
        be established by the Board or under a formula established by the Board.
        The exercise price of each stock option may be greater or lesser than
        100% of the Fair Market Value of the Common Stock subject to the stock
        option as of the date of grant, provided that the exercise price of an
        option that is a California Regulated Security granted while this Plan
        is a California Regulated Plan may not be less than 85% of the Fair
        Market Value of the Common Stock on the date the option is granted. In
        all cases, the exercise price shall not be less than 110% of the Fair
        Market Value of the Common Stock as of the date of grant in the case of
        a stock option granted to a Ten Percent Owner. The exercise price shall
        be payable in cash, by payment under an arrangement with a broker where
        payment is made pursuant to an irrevocable direction to the broker to
        deliver all or part of the proceeds from the sale of the option shares
        to the Company, by the surrender of shares of Common Stock owned by the
        optionholder exercising the option and having a fair market value on the
        date of exercise equal to the exercise price but only if such will not
        result in an accounting charge to the Company, or by any combination of
        the foregoing. In addition, the exercise price shall be payable in such
        other form(s) of consideration as the Committee in its discretion shall
        specify, including without limitation by loan (as described in Section
        10) or by techniques that may result in an accounting charge to the
        Company. For the purposes of determining the fair market value of shares
        of Common Stock surrendered to pay the exercise price of an option,
        "fair market value" shall mean the average of the high and low prices of
        the Common Stock on the last trading day preceding the date of delivery
        of such Common Stock to the Company on the national securities exchange,
        national market system or other trading market on which the Common Stock
        has the highest average trading volume.








                                      -4-

<PAGE>   5

                                                                  Exhibit 10.51

7.      RIGHT OF FIRST REFUSAL.

               (a) Offer of Sale; Notice of Proposed Sale. If at any time a
        Participant desires to sell, transfer or otherwise dispose of any Shares
        or any interest in such Shares, the Participant shall deliver written
        notice of his or her desire to do so (the "Sale Notice") to the Company,
        which Sale Notice must be accompanied by a binding agreement (the
        "Binding Agreement"), which Binding Agreement shall be expressly subject
        to the Participant's compliance with the provisions of this Agreement,
        including this Section 7, with a bona fide purchaser reasonably capable
        of completing such purchase (the "Proposed Transferee"). The Sale Notice
        and Binding Agreement shall specify (i) the name and address of the
        Proposed Transferee(s), (ii) the number of Shares the Participant
        proposes to sell, transfer or otherwise dispose of (referred to herein
        as "Offered Shares"), (iii) the consideration per Offered Share to be
        delivered to the Participant for the proposed sale, transfer or
        disposition and (iv) all other material terms and conditions of the
        proposed transaction.

               (b) Option to Purchase.

                      (i) The Company shall have the option to purchase all or
        any portion of the Offered Shares for the consideration per share and on
        the terms and conditions set forth in the Sale Notice. The Company may
        only exercise such option by delivery of written notice to the
        Participant prior to the date ten (10) days after the date of delivery
        of the Sale Notice.

                      (ii) If the Company delivers written notice of its intent
        to purchase all or any portion of the Offered Shares, then the closing
        of the purchase of the Offered Shares by the Company shall take place at
        the offices of the Company no later than ten (10) days after the
        expiration of the applicable ten (10) day period.

               (c) Form of Consideration. To the extent that the consideration
        proposed to be paid by the Proposed Transferee for the Offered Shares
        consists of property other than cash or a promissory note (the "Non-Cash
        Consideration"), the consideration required to be paid by the Company
        exercising its options under this Section 7 may consist of cash equal to
        the value of the Non-Cash Consideration, as determined in good faith by
        the Company's Chief Executive Officer or Chief Financial Officer.
        Notwithstanding anything to the contrary set forth above, the ten (10)
        day period described in Section 7(b)(i) shall commence when the value of
        the Non-Cash Consideration is determined pursuant to this Section 7(c).




                                      -5-


<PAGE>   6

                                                                  Exhibit 10.51

               (d) Sales to Proposed Transferee. To the extent the Company fails
        (i) to deliver written notice or notices of intent to purchase any of
        the Offered Shares within the ten (10) day period specified in Section
        7(b)(i) or (ii) to close the purchase of the Offered Shares within the
        applicable period specified in Section 7(b)(ii), then the Participant
        may sell, transfer or otherwise dispose of the remaining Offered Shares
        to the Proposed Transferee at any time within fifty (50) days after the
        date of the delivery of the Sale Notice on the terms set forth in the
        Sale Notice and Binding Agreement. Any Offered Shares not sold,
        transferred or otherwise disposed of within the applicable fifty (50)
        day period and any proposed transfer on terms more favorable to the
        Proposed Transferee than those described in the Sale Notice shall
        continue to be subject to all of the requirements of this Section 7 as
        if there had been no prior offer or Sale Notice. Notwithstanding the
        above, the Offered Shares shall not be sold, transferred or otherwise
        disposed of unless such purchaser or acquiror is bound or agrees in
        writing to be bound by the provisions of this Plan and the option
        agreement (and, if the purchaser or acquiror is an entity, such other
        terms reasonably imposed by the Company that are intended to circumvent
        avoidance of these provisions by means of an indirect transfer of the
        Shares), and any such sale, transfer or disposition where such purchaser
        or acquiror is not bound or does not so agree to be bound shall be void.

               (e) Permitted Transfers. Notwithstanding anything to the contrary
        set forth herein, to the extent specifically so provided in the
        applicable stock option agreement, the provisions of this Section 7
        shall not apply to any transfer or distribution by a Participant of
        Shares to: (a) a trust or similar entity directly or indirectly
        controlled by the Participant primarily for estate planning purposes,
        (b) the Participant's heirs, executors, administrators or beneficiaries
        upon the Participant's death, and (c) a spouse, sibling, parent or
        child, or to the spouse, sibling, parent or child of any such persons,
        or to a trust or similar entity of which such persons are the
        beneficiaries for estate planning purposes or domestic relations order
        issued by any court or other governmental or administrative body;
        provided, however, in the case of any such transfer that such transferee
        or distributee agrees in writing to comply with the provisions of this
        Agreement.

               (f) Effect of Not Following Procedures. Any sale, transfer or
        other disposition of Shares not in accordance with the foregoing
        procedures of this Section 7 shall be null and void and of no force or
        effect.

               (g) Termination. The provisions of this Section 7 shall terminate
        upon consummation of an initial public offering of the Company.

8.      LOCK-UP AGREEMENTS

        Each option agreement shall provide that, in connection with any public
        offering by the Company of its equity securities, any shares of Common
        Stock acquired or that may be acquired upon exercise or vesting of a
        stock option may not be sold, offered for sale, encumbered, or otherwise
        disposed of or subjected to any transaction that will involve any sales
        of securities of the Company, without the prior written consent of the
        Company


                                      -6-

<PAGE>   7

                                                                  Exhibit 10.51

        or such underwriter, as the case may be, for a period of 180 days after
        the effective date of the registration statement for such public
        offering. Any attempted transfer in violation of this Section 8 shall be
        null and void.

9.      ADMINISTRATION OF THE PLAN

        The Plan shall be administered by the Board, except that as provided
        herein the Plan may be administered by a Committee of the Board, as
        appointed from time to time by the Board. The Board shall fill vacancies
        on and from time to time may remove or add members to the Committee. The
        Committee shall act pursuant to a majority vote or unanimous written
        consent.

        Subject to the express provisions of this Plan, the Committee shall be
        authorized and empowered to do all things necessary or desirable in
        connection with the administration of this Plan, including, without
        limitation: (a) to prescribe, amend and rescind rules relating to this
        Plan and to define terms not otherwise defined herein; (b) to prescribe
        the form of documentation used to evidence any stock option awarded
        hereunder, including provision for such terms as it considers necessary
        or desirable, not inconsistent with the terms established by the Board;
        (c) to establish and verify the extent of satisfaction of any conditions
        to exercisability applicable to stock options; (d) to determine whether,
        and the extent to which, adjustments are required pursuant to Section 11
        hereof; and (e) to interpret and construe this Plan, any rules and
        regulations under the Plan and the terms and conditions of any stock
        option awarded hereunder, and to make exceptions to any procedural
        provisions in good faith and for the benefit of the Company.
        Notwithstanding any provision of this Plan, the Board may at any time
        limit the authority of the Committee to administer this Plan.

        The Board shall have the authority to establish subplans or other
        arrangements not inconsistent with this Plan which the Board deems
        necessary or advisable to comply with laws or requirements of foreign
        jurisdictions.

        All decisions, determinations and interpretations by the Board or,
        except as to the Board, the Committee, regarding the Plan, any rules and
        regulations under the Plan and the terms and conditions of any stock
        option awarded hereunder, shall be final and binding on all Participants
        and holders of stock options. The Board and the Committee may consider
        such factors as it deems relevant, in its sole and absolute discretion,
        in making such decisions, determinations and interpretations including,
        without limitation, the recommendations or advice of any officer or
        other employee of the Company and such attorneys, consultants and
        accountants as it may select.

10.     LOANS

        The Company may, if authorized by the Board, make loans for the purpose
        of enabling a Participant to exercise stock options and to pay the tax
        liability resulting from a stock option exercise under the Plan. The
        Board shall have full authority to determine the terms and




                                      -7-


<PAGE>   8

                                                                  Exhibit 10.51

        conditions of such loans. Such loans may be secured by the shares of
        Common Stock received upon exercise of such stock option.

11.     ADJUSTMENT OF AND CHANGES IN THE STOCK

        If the outstanding securities of the class then subject to this Plan are
        increased, decreased or exchanged for or converted into cash, property
        or a different number or kind of shares or securities, or if cash,
        property or shares or securities are distributed in respect of such
        outstanding securities, in either case as a result of a reorganization,
        reclassification, dividend (other than a regular cash dividend) or other
        distribution, stock split, reverse stock split, spin-off or the like, or
        if substantially all of the property and assets of the Company are sold,
        then, unless the terms of such transaction shall provide otherwise, the
        maximum number and type of shares or other securities that may be issued
        under this Plan shall be appropriately adjusted. The Committee shall
        determine in its sole discretion the appropriate adjustment to be
        effected pursuant to the immediately preceding sentence. In addition, in
        connection with any such change in the class of securities then subject
        to this Plan, the Committee may make appropriate and proportionate
        adjustments in the number and type of shares or other securities or cash
        or other property that may be acquired pursuant to stock options
        theretofore awarded under this Plan and the exercise price of such stock
        options.

        No right to purchase or receive fractional shares shall result from any
        adjustment in stock options pursuant to this Section 11. In case of any
        such adjustment, the shares subject to the stock option shall be rounded
        up to the nearest whole share of Common Stock.

12.     REGISTRATION, LISTING OR QUALIFICATION OF STOCK

        In the event that the Board or the Committee determines in its
        discretion that the registration, listing or qualification of the shares
        of Common Stock issuable under the Plan on any securities exchange or
        under any applicable law or governmental regulation is necessary as a
        condition to the issuance of such shares under the stock option, the
        stock option shall not be exercisable or exercised in whole or in part
        unless such registration, listing, qualification, consent or approval
        has been unconditionally obtained.

13.     TAXES

        The Board or Committee may make such provisions or impose such
        conditions as it may deem appropriate for the withholding or payment by
        a Participant of any taxes which it determines are necessary or
        appropriate in connection with any issuance of shares under this Plan,
        and the rights of a holder of a stock option in any shares are subject
        to satisfaction of such conditions. The Company shall not be required to
        issue shares of Common Stock or to recognize the disposition of such
        shares until such obligations are satisfied. At the Participant's
        election, any such obligations may be satisfied by having the Company
        withhold a portion of the shares of Common Stock that otherwise would be
        issued to the holder of the stock option upon exercise of the stock
        option or by surrendering to the Company shares of Common Stock
        previously acquired. The Company and any affiliate of


                                      -8-


<PAGE>   9

                                                                  Exhibit 10.51

        the Company shall not be liable to a Participant or any other persons as
        to any tax consequence expected, but not realized, by any Participant or
        other person due to the receipt of any stock options awarded hereunder.

14.     EFFECTIVE DATE, AMENDMENT, AND TERMINATION OF THE PLAN

        The Former Plan became effective upon its approval on September 22, 2000
        by a majority of the outstanding shares of the Company in accordance
        with applicable law. This amended and restated Plan is effective as of
        July 26, 2001. Unless earlier suspended or terminated by the Board, no
        stock options may be awarded after the tenth anniversary of the date the
        Plan is approved by the Company's stockholders. The Board may
        periodically amend the Plan as determined appropriate, without further
        action by the Company's stockholders except to the extent required by
        applicable law. Notwithstanding the foregoing, and subject to adjustment
        pursuant to Section 11, the Plan may not be amended to materially
        increase the number of shares of Common Stock authorized for issuance
        under the Plan, unless any such amendment is approved by the Company's
        stockholders. The Plan may be earlier terminated at such earlier time as
        the Board may determine. Termination and expiration of the Plan will not
        affect the rights and obligations arising under stock options
        theretofore awarded and then in effect.

15.     MISCELLANEOUS

        (a) Provision of Information: The Board in its sole discretion may
        determine what, if any, financial and other information is to be
        provided to Participants and when such financial and other information
        is to be provided after giving consideration to applicable federal and
        state laws, rules and regulations, including, without limitation,
        applicable federal and state securities laws, rules and regulations,
        provided that during such times as this Plan is a California Regulated
        Plan, holders of California Regulated Securities will receive financial
        statements of the Company on an annual basis.

        (b) Governing Law: The Plan shall be governed by the laws of the state
        of Delaware, without giving effect to the principles of the conflicts of
        laws thereof, provided that this will not be construed to apply the
        California Securities Law or the California Securities Rules to
        securities or holders thereof to which the California Securities Law or
        California Securities Rules would not otherwise apply. In the event any
        provision of the Plan shall be held invalid, illegal or unenforceable,
        in whole or in part, for any reason, such determination shall not affect
        the validity, legality or enforceability of any remaining provision,
        portion of provision or the Plan overall, which shall remain in full
        force and effect as if the Plan had been absent the invalid, illegal or
        unenforceable provision or portion thereof.





                                      -9-



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.56
<SEQUENCE>7
<FILENAME>f74874ex10-56.txt
<DESCRIPTION>EXHIBIT 10.56
<TEXT>
<PAGE>   1
                                                                   EXHIBIT 10.56


June 28, 2001



Name
Address


        Re:    Agreement to Repurchase Tality Corporation Common Stock

Dear Tality Stockholder:

        Pursuant to that certain Common Stock Purchase Agreement (the "Purchase
Agreement"), dated on or about July 14, 2000, between yourself and Cadence
Design Systems, Inc. ("Cadence"), you purchased [Shares_Purchased] shares of
Class A common stock of Tality Corporation, to be held in the name of [Name]
(the "Shares"). Cadence hereby offers to repurchase the Shares for consideration
of $6.10 per share, which represents the fair market value of each of the Shares
as determined by the Board of Directors of Tality and Cadence and constitutes a
total consideration of $[Total_Purchase_Price] for all of the Shares (the
"Repurchase Price"), which offer is effective only if accepted on or prior to
July 30, 2001, unless the offer is extended.

        By indicating your acceptance of this repurchase offer and signing this
letter agreement and returning it, along with a completed copy of the attached
Substitute Form W-9, or, if you are not a resident of the United States, a Form
W-8 (which will be provided upon request), to Cadence at Cadence Design Systems,
Inc., 2655 Seely Avenue, Building 5, San Jose, California 95134, Attn: Stock
Administration, Fax: (408) 944-7835) no later than July 30, 2001, you hereby
accept Cadence's offer to repurchase the Shares, on the terms and conditions
herein. If you reject this repurchase offer, please indicate your rejection
below and sign this letter agreement and return to Cadence. Once you have
accepted this repurchase offer, you may not withdraw your acceptance.

        If your properly completed acceptance is received by Cadence and the
repurchase is completed within one year of your acquisition of the Shares, any
loss recognized by you on such sale will be treated as a short-term capital
loss. However, if such sale is completed after one year of your acquisition of
the Shares, any such loss will be treated as a long-term capital loss. We urge
you to discuss the tax implications to you with your tax advisor.

        If you do not accept this offer, there will be no change to your
existing Tality Shares. It is anticipated that the Tality entities will undergo
some form of reorganization, but such reorganization, once completed, is not
expect to change the terms of the Tality Shares. Tality Shares that are not
repurchased will not be registered under the Securities Act of 1933, and
therefore will not constitute liquid securities before any initial public
offering of Tality Corporation.



<PAGE>   2


        In connection with your purchase of the Shares, you delivered to Cadence
a secured promissory note (the "Promissory Note") for the purchase price of the
Shares which bears interest at the rate of 6.51% per annum, compounded
semi-annually. As payment of the Repurchase Price, Cadence will reduce the
outstanding amount owed to Cadence by you pursuant to the Promissory Note by the
amount of the Repurchase Price (less any applicable withholding taxes),
resulting in the total amount owed under the Promissory Note to be
$[Total_Balance]. This amount consists of the $[Principal] remaining
principal amount and $[Interest] accrued interest as of the date of this
letter. Additional interest will continue to accrue on any outstanding balance
on and as of the date hereof and will continue to accrue as long as such balance
remains outstanding. Cadence will also release its security interest in the
Shares. Your acceptance of this agreement will amend your Promissory Note to
reduce the amount currently owed under the Promissory Note and to make the
Promissory Note unsecured. The interest rate of the Promissory Note will not
change. You will not receive a new promissory note reflecting these changes.

        In consideration of Cadence's offer to repurchase the Shares, you hereby
release, acquit and forever discharge Cadence, Tality, Tality Canada
Corporation, Tality UK, Ltd. and their respective officers, directors, agents,
servants, employees, attorneys, stockholders, successors, assigns and other
affiliates (the "Releasees") of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys' fees, damages,
indemnities and obligations of every kind and nature, in law, equity or
otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed, directly or indirectly arising out of or in any way connected with
the Purchase Agreement, the related Pledge Agreement, the transactions
contemplated by such agreements, stock, stock options, or any other ownership
interests in Tality Corporation, including but not limited to, all such claims
and demands pursuant to any federal, state or local law, statute, or causes of
action under securities law, contract law or tort law; or any related events,
acts or conduct at any time prior to and including the date of execution of this
letter agreement.

        In addition, by signing this letter agreement, you understand and agree
that the release of claims described above includes claims which may be unknown
to you at present, and that you have read and understand Section 1542 of the
California Civil Code, which reads as follows: "A GENERAL RELEASE DOES NOT
EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM, MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." You hereby waive and
relinquish any and all rights under Section 1542 with respect to your release of
any unknown or unsuspected claims you might have against the Releasees.

        Promptly after receipt of your properly executed copy of this letter
agreement, the Pledge Agreement dated on or about July 19, 2000 executed by you
in connection with the Purchase Agreement and your Promissory Note will be
terminated and will be of no further force and effect.

        This letter agreement will be governed by and construed in accordance
with the laws of the State of California without regard to conflict of laws
principles thereof.


<PAGE>   3


        You acknowledge that this letter agreement has been prepared on behalf
of Cadence by Gibson, Dunn & Crutcher LLP, counsel to Cadence, and that Gibson,
Dunn & Crutcher LLP does not represent, and is not acting on behalf of you. You
have been provided with an opportunity to consult with your own counsel and tax
advisor with respect to this letter agreement.





                                       3



<PAGE>   4

        Should you have any questions regarding this matter please contact
Elizabeth Villalobos at Cadence, tel: (408) 944-7835 or via email at
lizv@cadence.com. We appreciate your assistance in handling this matter in a
timely fashion.

                                            Very truly yours,

                                            CADENCE DESIGN SYSTEMS, INC.


                                            By:  William Porter
                                            Its: Senior Vice President and
                                                 Chief Financial Officer






[_] I ACCEPT the offer to repurchase Tality common stock and related waiver

[_] I DO NOT accept the offer to repurchase Tality common stock

X ___________________________________    Date: __________________, 2001
Signature

Print Name: _________________________

X ___________________________________    Date: __________________, 2001
Spouse's Signature

Print Name: _________________________


Home Telephone Number (with area code): ________________________________









                                       4


<PAGE>   5

                   SUMMARY OF TERMS OF STOCK REPURCHASE OFFER

             -----------------------------------------------------

               RESPONSE NEEDED BY 12:00 MIDNIGHT, CALIFORNIA TIME,

                 ON JULY 30, 2001, UNLESS THE OFFER IS EXTENDED

             -----------------------------------------------------

        You must check your election and sign and date the Offer Letter, have
your spouse sign and date the Offer Letter and return it, along with a completed
copy of the attached Substitute Form W-9, or if you are not a resident of the
United States, a Form W-8 (which will be provided upon request), to Stock
Administration, Cadence Design Systems, Inc., 2655 Seely Avenue, Building 5, San
Jose, California 95134, Fax: (408) 944-7835, before 12:00 midnight, California
Time, on July 30, 2001, unless the offer is extended. If you have any questions,
please contact Elizabeth Villalobos at Cadence, tel: (408) 944-7835 or via email
at lizv@cadence.com.

             -----------------------------------------------------

        The following description summarizes some of the terms and conditions of
the offer to Repurchase Tality Corporation Class A Common Stock ("Tality
Stock"). Please read the Offer to Repurchase as well because the information in
this summary is not complete.

        WHO CAN PARTICIPATE IN THE REPURCHASE? Any holder of Tality Stock who
purchased such stock from Cadence may sell all of his or her Tality Stock.

        ARE THERE ANY CONDITIONS OF THE REPURCHASE? Any holder of Tality Stock
must transfer his or her Tality Stock on an all-or-nothing basis. Any such
holder must also agree to waive any claims against Cadence, Tality Corporation
and their affiliates relating to the offer and his or her ownership of Tality
Corporation equity. In addition, once a holder of Tality Stock accepts the
offer, this acceptance cannot be revoked.

        WHAT IS THE REPURCHASE PRICE PER SHARE OF THE TALITY STOCK? Cadence will
repurchase shares of Tality Stock at a repurchase price equal to $6.10, the fair
market value of such Tality Stock.

        WHAT DOES THE COMPANY RECOMMEND THAT I DO? Although the Cadence board of
directors or the compensation committee of the board has approved Cadence making
this offer, neither we nor our board of directors (nor any committee of the
board) makes any recommendation as to whether you should accept the Offer to
Repurchase or refrain from making such election. You must make your own decision
whether to elect to accept the Offer to Repurchase Tality Stock. Our board of
directors recognizes that the decision to accept the offer is an individual one
that should be based on a variety of factors and you should consult with your
personal financial and tax advisors if you have questions about your financial
or tax situation.





                                       5



<PAGE>   6

        WHAT HAPPENS TO MY TALITY STOCK IF I ACCEPT THE OFFER? If you accept the
offer, all of your Tality Stock will be cancelled and you will have no further
right or interest in Tality Stock.

        WHAT IS THE U.S. TAX TREATMENT OF RECEIPT OF THE REPURCHASE PRICE FOR
THE TALITY STOCK? If you accept the offer, you will recognize gain or loss equal
to the difference between the amount of cash that you receive and your tax basis
in the shares of Tality Stock that are tendered pursuant to the offer. For a
more detailed discussion, see "The Material U.S. Federal Income Tax
Consequences" contained in the Offer to Repurchase. We recommend that you
consult with your own tax advisor to determine the specific tax consequences to
you of accepting the offer.

        Under U.S. federal income tax law, a stockholder whose tendered shares
of Tality Common Stock are accepted for payment pursuant to the Offer to
Repurchase may be subject to backup withholding at a rate of 31%. To prevent
backup withholding on any payment made to a stockholder pursuant to the Offer to
Repurchase, the stockholder is required to notify Cadence of the stockholder's
current taxpayer identification number ("TIN") by completing the enclosed
Substitute Form W-9, certifying that the TIN provided on that form is correct
(or that such stockholder is awaiting a TIN), and that (i) the stockholder has
not been notified by the Internal Revenue Service that the stockholder is
subject to backup withholding as a result of failure to report all interest or
dividends or (ii) after being so notified, the Internal Revenue Service has
notified the stockholder that the stockholder is no longer subject to backup
withholding. If Cadence is not provided with the correct TIN, such stockholder
may be subject to a $50 penalty imposed by the Internal Revenue Service and
payments that are made to such stockholder with respect to the shares of Tality
Common Stock pursuant to the Offer to Repurchase may be subject to backup
withholding.

        Each stockholder is required to give Cadence the TIN (e.g., Social
Security number or employer identification number) of the record holder of the
shares of Tality Common Stock. A stockholder who does not have a TIN may check
the box in Part 3 of the Substitute Form W-9 if such stockholder has applied for
a number or intends to apply for a TIN in the near future. If the box in Part 3
is checked, the stockholder must also complete the "Certificate of Awaiting
Taxpayer Identification Number" below in order to avoid backup withholding. If
the box is checked, payments made will be subject to backup withholding unless
the stockholder has furnished Cadence with his or her TIN by the time payment is
made. A stockholder who checks the box in Part 3 in lieu of furnishing such
stockholder's TIN should furnish Cadence with such stockholder's TIN as soon as
it is received.

        Certain stockholders (including, among others, all corporations and
certain non-U.S. citizens) are not subject to these backup withholding
requirements. To avoid possible erroneous backup withholding, a stockholder who
is exempt from backup withholding should complete the Substitute Form W-9 by
providing his or her correct TIN, signing and dating the form, and writing
exempt on the face of the form. A stockholder who is not a U.S. citizen or who
is a non-U.S. entity should also submit to Cadence a properly completed Form
W-8, Certificate of Foreign Status (which will be provided upon request), signed
under penalty of perjury, attesting to the stockholder's exempt status.
Stockholders are urged to consult their own tax advisors to determine whether
they are exempt from these backup withholding and reporting requirements.




                                       6


<PAGE>   7

        If backup withholding applies, Cadence is required to withhold 31% of
any payments to be made to the stockholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained by filing a tax
return with the Internal Revenue Service. Cadence cannot refund amounts withheld
by reason of backup withholding.

        WHAT HAPPENS IF I DON'T ACCEPT THE OFFER? If you do not accept the Offer
to Repurchase, you will keep all of your current Tality Stock. It is anticipated
that the Tality entities will undergo some form of reorganization, but upon
completion of the reorganization, such reorganization is not expected to change
the terms of the Tality Stock. Tality Stock that is not Repurchased will not be
registered under the Securities Act of 1933, and therefore will not constitute
liquid securities before any initial public offering of Tality Corporation.






                                       7

<PAGE>   8

-------------------------------------------------------------------------------

                          CADENCE DESIGN SYSTEMS, INC.

-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S>                   <C>                                      <C>
     SUBSTITUTE       PART 1 - PLEASE PROVIDE YOUR TIN            Social Security Number OR
                      IN THE BOX AT THE RIGHT AND              Employer Identification Number
      FORM W-9        CERTIFY BY SIGNING AND DATING BELOW

                                                               --------------------------
 DEPARTMENT OF THE
      TREASURY
  INTERNAL REVENUE
      SERVICE
                      PART 2 - CERTIFICATION -                       PART 3 -

                      Under penalties of perjury, I certify that:    Awaiting TIN  [X]
                      (1)  The number shown on this form is my
                           correct Taxpayer Identification Number
                           (or I am waiting for a number to be
                           issued to me); and
                      (2)  I am not subject to backup withholding
                           because (a) I am exempt from backup
                           withholding, or (b) I have not been notified by the
                           Internal Revenue Service (the "IRS") that I am
                           subject to backup withholding as a result of a
                           failure to report all interest or dividends, or (c)
                           after being so notified, the IRS has notified me that
                           I am no longer subject to backup withholding.

    REQUEST FOR
      TAXPAYER
   IDENTIFICATION
   NUMBER ("TIN")

                      CERTIFICATION INSTRUCTIONS - You must cross out item (2)
                      above if you have been notified by the IRS that you are
                      subject to backup withholding because of underreporting
                      interest or dividends on your tax return. However, if
                      after being notified by the IRS that you were subject to
                      backup withholding you received another notification from
                      the IRS stating that your are no longer subject to backup
                      withholding, do not cross out such item (2).

                      Signature:
                                 -----------------------------------------------

                      Name:                                Date:
                           ----------------------------          ---------------

                      Address:
                               -------------------------------------------------
                                                  (PLEASE PRINT)
</TABLE>


NOTE:   FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
        WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
        YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
        PART 3 OF SUBSTITUTE FORM W-9.





                                       8



<PAGE>   9
-------------------------------------------------------------------------------

             CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

        I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld.

Signature:                                         Date:           , 200[ ]
          -------------------------------------          ----------     ---

-------------------------------------------------------------------------------













                                        9



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.57
<SEQUENCE>8
<FILENAME>f74874ex10-57.txt
<DESCRIPTION>EXHIBIT 10.57
<TEXT>
<PAGE>   1
                                                                  EXHIBIT 10.57

                          CADENCE DESIGN SYSTEMS, INC.
                        2001 EMPLOYEE STOCK PURCHASE PLAN

                   ADOPTED BY BOARD OF DIRECTORS JULY 13, 2001
                             TERMINATION DATE: NONE

                STATUS AS SECTION 423 PLAN DEPENDS ON SHAREHOLDER
                         APPROVAL AT 2002 ANNUAL MEETING

1.      PURPOSE.

        (a) The Plan was established effective as of July 13, 2001.

        (b) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Affiliates may be given an opportunity to
purchase Shares of the Company.

        (c) The Company, by means of the Plan, seeks to secure and retain the
services of new Employees for itself and/or its designated Affiliates and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and/or such Affiliates.

        (d) The Company intends that the Rights to purchase Shares granted under
the Plan be considered options issued under an "employee stock purchase plan,"
as that term is defined in Section 423(b) of the Code, and will seek shareholder
approval of the Plan, in accordance with Section 423(b)(2) of the Code.

2.      DEFINITIONS.

        (a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.

        (b) "BOARD" means the Board of Directors of the Company.

        (c) "CODE" means the United States Internal Revenue Code of 1986, as
amended.

        (d) "COMMITTEE" means a committee of the Board appointed by the Board in
accordance with subsection 3(c) of the Plan.

        (e) "COMPANY" means Cadence Design Systems, Inc., a Delaware
corporation.

        (f) "DIRECTOR" means a member of the Board.

        (g) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set
forth in the Offering Memorandum for eligibility to participate in the Offering.



<PAGE>   2

        (h) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or an Affiliate of the Company designated for
participation in the Plan. Neither service as a Director nor payment of a
director's fee shall be sufficient to constitute "employment" by the Company or
the Affiliate.

        (i) "EMPLOYEE STOCK PURCHASE PLAN" means a plan that grants rights
intended to be options issued under an "employee stock purchase plan," as that
term is defined in Section 423(b) of the Code.

        (j) "EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.

        (k) "FAIR MARKET VALUE" means the value of a security, as determined in
good faith by the Board. If the security is listed on the New York Stock
Exchange or any other established stock exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap Market, then, except as otherwise
provided in the Offering Memorandum, the Fair Market Value of the security shall
be the closing sales price (rounded up where necessary to the nearest whole
cent) for such security (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or, in the event that the security is traded
on more than one such exchange or market, the exchange or market with the
greatest volume of trading in the relevant security of the Company) on the
trading day occurring on or closest to the relevant determination date, as
reported in The Wall Street Journal or such other source as the Board deems
reliable, and on the date as determined more precisely in the Offering
Memorandum.

        (l) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.

        (m) "OFFERING" means the grant of Rights to purchase Shares under the
Plan to Eligible Employees.

        (n) "OFFERING DATE" means a date selected by the Board for an Offering
to commence.

        (o) "OFFERING MEMORANDUM" means a memorandum describing the terms of the
then current or otherwise relevant Offering.





                                       2


<PAGE>   3

        (p) "PARTICIPANT" means an Eligible Employee who holds an outstanding
Right granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Right granted under the Plan.

        (q) "PLAN" means this 2001 Employee Stock Purchase Plan.

        (r) "PURCHASE DATE" means one or more dates established by the Board
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.

        (s) "RIGHT" means an option to purchase Shares granted pursuant to the
Plan.

        (t) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.

        (u) "SECURITIES ACT" means the United States Securities Act of 1933, as
amended.

        (v) "SHARE" means a share of the common stock of the Company.

3.      ADMINISTRATION.

        (a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c). Whether
or not the Board has delegated administration, the Board shall have the final
power to determine all questions of policy and expediency that may arise in the
administration of the Plan.

        (b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

               (i) To determine when and how Rights to purchase Shares shall be
granted and the provisions of each Offering of such Rights (which need not be
identical).

               (ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.

               (iii) To construe and interpret the Plan and Rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.

               (iv) To amend the Plan as provided in Section 14.





                                       3


<PAGE>   4

               (v) Generally, to exercise such powers and to perform such acts
as it deems necessary or expedient to promote the best interests of the Company
and its Affiliates and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.

        (c) The Board may delegate administration of the Plan to a Committee of
the Board composed of two (2) or more members, all of the members of which
Committee may be, in the discretion of the Board, Non-Employee Directors. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee of two (2) or
more Non-Employee Directors any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or such a subcommittee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.

4.      SHARES SUBJECT TO THE PLAN.

        (a) Subject to the provisions of Section 13 relating to adjustments upon
changes in securities, the Shares that may be sold pursuant to Rights granted
under the Plan shall not exceed in the aggregate One Million Seven Hundred Fifty
Thousand (1,750,000) Shares. If any Right granted under the Plan shall for any
reason terminate without having been exercised, the Shares not purchased under
such Right shall again become available for the Plan.

        (b) The Shares subject to the Plan may be unissued Shares or Shares that
have been bought on the open market at prevailing market prices or otherwise.

5.      GRANT OF RIGHTS; OFFERING.

        (a) The Board may from time to time grant or provide for the grant of
Rights to purchase Shares under the Plan to Eligible Employees in an Offering on
one or more Offering Dates selected by the Board. All Employees granted Rights
under the Plan shall have the same rights and privileges, except that such
rights may differ only to the extent permitted under Section 423 of the Code.
Each Offering shall be in such form and shall contain such terms and conditions
as the Board shall deem appropriate, which shall comply with the requirements of
Section 423(b)(5) of the Code that all Employees granted Rights to purchase
Shares under the Plan shall have the same rights and privileges. The terms and
conditions of an Offering shall be incorporated by reference into the Plan and
treated as part of the Plan. The provisions of separate Offerings need not be
identical, but each Offering shall include (through incorporation of the
provisions of this Plan by reference in the Offering Memorandum or otherwise)
the period during which the Offering shall be effective, which period shall not
exceed twenty-seven (27) months beginning with the Offering Date, and the
substance of the provisions contained in Sections 6 through 9, inclusive.






                                       4

<PAGE>   5

        (b) If a Participant has more than one Right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant will be
deemed to apply to all of his or her Rights under the Plan, and (ii) an
earlier-granted Right (or a Right with a lower exercise price, if two Rights
have identical grant dates) will be exercised to the fullest possible extent
before a later-granted Right (or a Right with a higher exercise price if two
Rights have identical grant dates) will be exercised.

6.      ELIGIBILITY.

        (a) Rights may be granted only to Employees of the Company or to
Employees of an Affiliate, as the Board may designate as provided in subsection
3(b). Except as provided in subsection 6(b), an Employee shall not be eligible
to be granted Rights under the Plan unless, on the Offering Date, such Employee
has been in the employ of the Company or the Affiliate, as the case may be, for
such continuous period preceding such grant as the Board may require, but in no
event shall the required period of continuous employment be equal to or greater
than two (2) years. Rights shall be granted to all Eligible Employees of any
corporation whose Employees are granted any Rights under this Plan by reason of
their employment by such corporation, except that there may be excluded
Employees (i) whose customary employment is fewer than 20 hours per week (or
such lower amount as established in the Offering Memorandum), (ii) whose
customary employment is for not more than five months during any calendar year
(or such shorter period as established in the Offering Memorandum), (iii) who
have completed less than two years of employment by the Company or Affiliate (or
such shorter period as established in the Offering Memorandum), (iv) who are
"highly compensated" within the meaning of Section 414(q) or the Code, and (v)
who otherwise may be excluded without violating Section 423 of the Code or other
applicable law.

        (b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering Memorandum which coincides with the day on which such person
becomes an Eligible Employee or which occurs thereafter, receive a Right under
that Offering, which Right shall thereafter be deemed to be a part of that
Offering. Such Right shall have the same characteristics as any Rights
originally granted under that Offering, as described herein, except that:

               (i) the date on which such Right is granted shall be the
"Offering Date" of such Right for all purposes, including determination of the
exercise price of such Right;

               (ii) the period of the Offering with respect to such Right shall
begin on its Offering Date and end coincident with the end of such Offering; and

               (iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.






                                       5

<PAGE>   6


        (c) No Employee shall be eligible for the grant of any Rights under the
Plan if, immediately after any such Rights are granted, such Employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subsection 6(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any Employee, and stock which such Employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such Employee.

        (d) An Eligible Employee may be granted Rights under the Plan only if
such Rights, together with any other Rights granted under all Employee Stock
Purchase Plans of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such Eligible Employee's rights to purchase
Shares or shares of any Affiliate to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of the fair market value of such Shares (determined
at the time such Rights are granted) for each calendar year in which such Rights
are outstanding at any time. The provisions of Section 423(b)(8) of the Code
shall govern the application of this Section 6(d).

7.      RIGHTS; PURCHASE PRICE.

        (a) On each Offering Date, each Eligible Employee, pursuant to an
Offering made under the Plan, shall be granted the Right to purchase up to the
number of Shares purchasable either:

               (i) with a minimum and maximum percentage or percentages
designated by the Board (which need not be uniform throughout the Offering, but
any fluctuations in such percentages shall be applied equally to all Employees
participating in the Offering) not exceeding twenty percent (20%) of such
Employee's Earnings (as defined by the Board in each Offering Memorandum) during
the period which begins on the Offering Date (or such later date as the Board
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering, which
amount shall, as specified in the Offering Memorandum for that Offering, be (1)
withheld, in whole or in part, from such Employee's Earnings during the period
which begins on the Offering Date (or such later date as the Board determines
for a particular Offering) and ends on the date stated in the Offering
Memorandum for that Offering, which date shall be no later than the end of the
Offering and/or (2) contributed, in whole or in part, by such Employee during
such period; or

               (ii) with a maximum dollar amount designated by the Board that,
as the Board determines for a particular Offering, (1) shall be withheld, in
whole or in part, from such Employee's Earnings (as defined by the Board in each
Offering Memorandum) during the period which begins on the Offering Date (or
such later date as the Board determines for a particular Offering) and ends on
the date stated in the Offering, which date shall be no later than the end of
the Offering and/or (2) shall be contributed, in whole or in part, by such
Employee during such period.






                                       6

<PAGE>   7

        (b) The Board shall establish one or more Purchase Dates during an
Offering on which Rights granted under the Plan shall be exercised and purchases
of Shares carried out in accordance with such Offering.

        (c) In connection with each Offering made under the Plan, the Board may
specify a maximum amount of Shares that may be purchased by any Participant as
well as a maximum aggregate amount of Shares that may be purchased by all
Participants pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board may specify a
maximum aggregate amount of Shares which may be purchased by all Participants on
any given Purchase Date under the Offering. If the aggregate purchase of Shares
upon exercise of Rights granted under the Offering would exceed any such maximum
aggregate amount, the Board shall make a pro rata allocation of the Shares
available in as nearly a uniform manner as shall be practicable and as it shall
deem to be equitable and consistent with the requirements of Section 423 of the
Code.

        (d) The purchase price of Shares acquired pursuant to Rights granted
under the Plan shall be not less than the lesser of:

               (i) an amount equal to eighty-five percent (85%) of the fair
market value of the Shares on the Offering Date; or

               (ii) an amount equal to eighty-five percent (85%) of the fair
market value of the Shares on the Purchase Date.

8.      PARTICIPATION; WITHDRAWAL; TERMINATION.

        (a) An Eligible Employee may become a Participant in the Plan pursuant
to an Offering by delivering an enrollment form to the Company within the time
specified in the Offering Memorandum, in such form as the Company provides. Each
such agreement shall authorize payroll deductions of up to the maximum
percentage specified by the Board of such Employee's Earnings during the
Offering (as defined in each Offering). The payroll deductions made for each
Participant shall be credited to a bookkeeping account for such Participant
under the Plan and either may be deposited with the general funds of the Company
or may be deposited in a separate account in the name of, and for the benefit
of, such Participant with a financial institution designated by the Company. To
the extent provided in the Offering, a Participant may reduce (including to
zero) or increase such payroll deductions. To the extent provided in the
Offering, a Participant may begin such payroll deductions after the beginning of
the Offering. A Participant may make additional payments into his or her account
only if specifically provided for in the Offering Memorandum and only if the
Participant has not already had the maximum permitted amount withheld during the
Offering.

        (b) At any time during an Offering, a Participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any




                                       7

<PAGE>   8

time prior to the end of the Offering except as provided by the Board in the
Offering Memorandum. Upon such withdrawal from the Offering by a Participant,
the Company shall distribute to such Participant all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire Shares for the Participant) under the Offering, without interest
unless otherwise specified in the Offering Memorandum, and such Participant's
interest in that Offering shall be automatically terminated. A Participant's
withdrawal from an Offering will have no effect upon such Participant's
eligibility to participate in any other Offerings under the Plan but such
Participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.

        (c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating Employee's employment
with the Company and its designated Affiliates for any reason (subject to any
post-employment participation period required by law) or other lack of
eligibility. The Company shall distribute to such terminated Employee all of his
or her accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire Shares for the terminated Employee) under
the Offering, without interest unless otherwise specified in the Offering
Memorandum. If the accumulated payroll deductions have been deposited with the
Company's general funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated payroll deductions
have been deposited in a separate account with a financial institution as
provided in subsection 8(a), then the distribution shall be made from the
separate account, without interest unless otherwise specified in the Offering
Memorandum.

        (d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in Section 15 and, otherwise during his
or her lifetime, shall be exercisable only by the person to whom such Rights are
granted.

9.      EXERCISE.

        (a) On each Purchase Date specified in the relevant Offering Memorandum,
each Participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of Shares up to the maximum amount of Shares
permitted pursuant to the terms of the Plan and the applicable Offering, at the
purchase price specified in the Offering Memorandum for that Offering. No
fractional Shares shall be issued upon the exercise of Rights granted under the
Plan unless specifically provided for in the Offering and permitted by law.

        (b) Unless otherwise specifically provided in the Offering Memorandum,
the amount, if any, of accumulated payroll deductions remaining in any
Participant's account after the purchase of Shares that is equal to the amount
required to purchase one or more whole Shares on the final Purchase Date of the
Offering shall be distributed in full to the Participant at the end of the
Offering, without interest. If the accumulated payroll deductions have been
deposited with the Company's general funds, then the distribution shall be made
from the general funds of the



                                       8

<PAGE>   9

Company, without interest. If the accumulated payroll deductions have been
deposited in a separate account with a financial institution as provided in
subsection 8(a), then the distribution shall be made from the separate account,
without interest unless otherwise specified in the Offering Memorandum.

        (c) The amount, if any, of accumulated payroll deductions remaining in
any Participant's account after the purchase of Shares that is less than the
amount required to purchase one whole Share on the final Purchase Date of the
Offering shall be carried forward, without interest, into the next Offering.

        (d) No Rights granted under the Plan may be exercised to any extent
unless the Shares to be issued upon such exercise under the Plan (including
Rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act and the Plan is in material compliance with all
applicable state, foreign and other securities and other laws applicable to the
Plan. If on a Purchase Date in any Offering hereunder the Shares are not so
registered or the Plan is not in such compliance, no Rights granted under the
Plan or any Offering shall be exercised on such Purchase Date, and the Purchase
Date shall be delayed until the Shares are subject to such an effective
registration statement and the Plan is in such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If, on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Shares are not registered and the Plan is not in
such compliance, no Rights granted under the Plan or any Offering shall be
exercised and all amounts contributed by the Participant during the Offering
(reduced to the extent, if any, such deductions have been used to acquire
Shares) shall be distributed to the Participants, without interest unless
otherwise specified in the Offering Memorandum. If the amounts contributed by
the Participant have been deposited with the Company's general funds, then the
distribution shall be made from the general funds of the Company, without
interest. If the amounts contributed by the Participant have been deposited in a
separate account with a financial institution as provided in subsection 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering Memorandum.

10.     COVENANTS OF THE COMPANY.

        (a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the amount of Shares required to satisfy such Rights are
available.

        (b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell Shares upon exercise of the
Rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Shares under the Plan, the Company shall be relieved from any liability for
failure to issue and sell Shares upon exercise of such Rights unless and until
such authority is obtained.





                                       9


<PAGE>   10

11.     USE OF PROCEEDS FROM SHARES.

        Proceeds from the sale of Shares pursuant to Rights granted under the
Plan shall constitute general funds of the Company.

12.     RIGHTS AS A STOCKHOLDER AND EMPLOYEE.

        (a) A Participant shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to, Shares subject to Rights granted
under the Plan unless and until the Participant's Shares acquired upon exercise
of Rights under the Plan are recorded in the books of the Company.

        (b) Neither the Plan nor the grant of any Right thereunder shall confer
any right on any Employee to remain in the employ of the Company or any
Affiliate or restrict the right of the Company or any Affiliate to terminate
such Employee's employment.

13.     ADJUSTMENTS UPON CHANGES IN SECURITIES.

        (a) Subject to any required action by the stockholders of the Company,
the number of Shares covered by each Right under the Plan that has not yet been
exercised and the number of Shares that have been authorized for issuance under
the Plan but have not yet been placed under a Right (collectively, the
"Reserves"), as well as the price per Share covered by each Right under the Plan
that has not yet been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock split
or the payment of stock dividend (but only on the Common Stock) or any other
increase or decrease in the number of Shares 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 issue 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 subject to a Right.

        (b) In the event of the proposed dissolution or liquidation of the
Company, any and all Offerings shall terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Board.
The Board may, in the exercise of its sole discretion in such instances, declare
that the Rights under the Plan shall terminate as of a date fixed by the Board
and give each Participant the right to exercise his or her Right. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger or consolidation of the Company with or into another corporation or a
parent or subsidiary of such successor corporation when the Company is not the
surviving corporation, or a reverse merger in which the Company is the surviving
corporation but the Shares outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, any and all Offerings shall terminate immediately
prior to the consummation of such



                                       10

<PAGE>   11

proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, and in lieu of assumption or
substitution of the Rights, provide that each Participant shall have the right
to exercise his or her Right. If the Board makes a Right exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the Board
shall notify the Participant that the Right shall be fully exercisable for a
period of twenty (20) days from the date of such notice (or such other period of
time as the Board shall determine), and the Right shall terminate upon the
expiration of such period.

        (c) The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per Share covered by each outstanding Right, in the event that the Company
effects one or more reorganizations, recapitalizations, rights offering, or
other increases or reductions of outstanding Shares, and in the event of the
Company being consolidated with or merged into any other corporation.

14.     AMENDMENT OF THE PLAN.

        (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in securities and except as to minor amendments to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Affiliate, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 423 of the Code, Rule 16b-3
under the Exchange Act or any Nasdaq or other securities exchange listing
requirements. Currently under the Code, stockholder approval within twelve (12)
months before or after the adoption of the amendment is required where the
amendment will:

               (i) Increase the amount of Shares that may be issued under the
Plan;

               (ii) Modify the provisions as to eligibility for participation in
the Plan to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section 423
of the Code; or

               (iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code.

        (b) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
and/or to bring the Plan and/or Rights granted under it into compliance
therewith.




                                       11



<PAGE>   12
        (c) Rights and obligations under any Rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan without the consent
of the person to whom such Rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as necessary to ensure that
the Plan and/or Rights granted under the Plan comply with the requirements of
Section 423 of the Code.

15.     DESIGNATION OF BENEFICIARY.

        (a) A Participant may file a written designation of a beneficiary who is
to receive any Shares and/or cash, if any, from the Participant's account under
the Plan in the event of such Participant's death subsequent to the end of an
Offering but prior to delivery to the 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 during an Offering.

        (b) The Participant may change such designation of beneficiary 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 sole 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.

16.     TERMINATION OR SUSPENSION OF THE PLAN.

        (a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the Shares available for issuance under the Plan, as increased and/or adjusted
from time to time, have been issued under the terms of the Plan. No Rights may
be granted under the Plan while the Plan is suspended or after it is terminated.

        (b) Rights and obligations under any Rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan (including any Offering Memorandum) or with the
consent of the person to whom such Rights were granted, or except as necessary
to comply with any laws or governmental regulation, or except as necessary to
ensure that the Plan and/or Rights granted under the Plan comply with the
requirements of Section 423 of the Code.

17.     TAX WITHHOLDING AND OTHER TAXES AND CONTRIBUTIONS

        The Company and any Affiliate whose Employees are Eligible Employees
shall withhold from each Participant's earnings or other amounts payable to the
Participant income tax, social





                                       12


<PAGE>   13

security taxes and other taxes required or, if the Company or such Affiliate so
chose, permitted, to be withheld with respect to such amounts under applicable
law. The Participant shall be liable for all such amounts. In the event the
Company or an Affiliate does not withhold such taxes or a Participant's earnings
are insufficient to satisfy such withholding, the Company or an Affiliate shall
have the right to effect the sale of such Participant's Shares on behalf of the
Participant and pay the proceeds to the Company or to the Affiliate, retain
amounts that have been deducted from payroll and would otherwise be used to
purchase Shares, withhold such taxes from amounts otherwise due to the
Participant, or take any other action that they deem necessary to cause the
Participant to fulfill such obligation.

18.     EFFECTIVE DATE OF PLAN.

        The Plan shall become effective upon adoption by the Board.






                                       13




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.58
<SEQUENCE>9
<FILENAME>f74874ex10-58.txt
<DESCRIPTION>EXHIBIT 10.58
<TEXT>
<PAGE>   1
                                                                  EXHIBIT 10.58


                          CADENCE DESIGN SYSTEMS, INC.
                   NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

                   ADOPTED BY BOARD OF DIRECTORS JULY 13, 2001
                        STOCKHOLDER APPROVAL NOT REQUIRED
                             TERMINATION DATE: NONE


1.      PURPOSE.

        (a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Affiliates may be given an opportunity to
purchase Shares of the Company.

        (b) The Company, by means of the Plan, seeks to secure and retain the
services of new Employees for itself and/or its designated Affiliates and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and/or such Affiliates.

2.      DEFINITIONS.

        (a) "AFFILIATE" means any entity approved by the Board in which the
Company holds a direct or indirect ownership interest (by value or voting
rights) of at least 50%.

        (b) "BOARD" means the Board of Directors of the Company.

        (c) "COMMITTEE" means a committee of the Board appointed by the Board in
accordance with subsection 3(c) of the Plan.

        (d) "COMPANY" means Cadence Design Systems, Inc., a Delaware
corporation.

        (e) "DIRECTOR" means a member of the Board.

        (f) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set
forth in the Offering Memorandum for eligibility to participate in the Offering.

        (g) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or an Affiliate of the Company. Neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
"employment" by the Company or the Affiliate.

        (h) "EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.

        (i) "FAIR MARKET VALUE" means the value of a security, as determined in
good faith by the Board. If the security is listed on the New York Stock
Exchange or any other established stock exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap Market, then, except as otherwise
provided in the Offering Memorandum, the Fair Market Value of the security shall
be the closing sales price (rounded up where necessary to the nearest whole
cent) for such security (or the closing bid, if no sales were reported) as
quoted on such exchange or


<PAGE>   2

market (or, in the event that the security is traded on more than one such
exchange or market, the exchange or market with the greatest volume of trading
in the relevant security of the Company) on the trading day occurring on or
closest to the relevant determination date, as reported in The Wall Street
Journal or such other source as the Board deems reliable, and on the date as
determined more precisely in the Offering Memorandum.

        (j) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.

        (k) "OFFERING" means the grant of Rights to purchase Shares under the
Plan to Eligible Employees.

        (l) "OFFERING DATE" means a date selected by the Board for an Offering
to commence.

        (m) "OFFERING MEMORANDUM" means a memorandum describing the terms of the
then current or otherwise relevant Offering.

        (n) "PARTICIPANT" means an Eligible Employee who holds an outstanding
Right granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Right granted under the Plan.

        (o) "PLAN" means this Non-Qualified Employee Stock Purchase Plan.

        (p) "PURCHASE DATE" means one or more dates established by the Board
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.

        (q) "RIGHT" means an option to purchase Shares granted pursuant to the
Plan.

        (r) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.

        (s) "SECURITIES ACT" means the United States Securities Act of 1933, as
amended.

        (t) "SHARE" means a share of the common stock of the Company.





                                       2


<PAGE>   3

3.      ADMINISTRATION.

        (a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c). Whether
or not the Board has delegated administration, the Board shall have the final
power to determine all questions of policy and expediency that may arise in the
administration of the Plan.

        (b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

               (i) To determine when and how Rights to purchase Shares shall be
granted and the provisions of each Offering of such Rights (which need not be
identical).

               (ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.

               (iii) To designate from time to time which Employees are Eligible
Employees.

               (iv) To construe and interpret the Plan and Rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.

               (v) To amend the Plan as provided in Section 14.

               (vi) Generally, to exercise such powers and to perform such acts
as it deems necessary or expedient to promote the best interests of the Company
and its Affiliates.

        (c) The Board may delegate administration of the Plan to a Committee of
the Board composed of two (2) or more members, all of the members of which
Committee may be, in the discretion of the Board, Non-Employee Directors. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee of two (2) or
more Non-Employee Directors any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or such a subcommittee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.

4.      SHARES SUBJECT TO THE PLAN.

        (a) Subject to the provisions of Section 13 relating to adjustments upon
changes in securities, the Shares that may be sold pursuant to Rights granted
under the Plan shall not exceed in the aggregate Seven Hundred Fifty Thousand
(750,000) Shares. If any Right granted under the Plan shall for any reason
terminate without having been exercised, the Shares not purchased under such
Right shall again become available for the Plan.

        (b) The Shares subject to the Plan may be unissued Shares or Shares that
have been bought on the open market at prevailing market prices or otherwise.





                                       3


<PAGE>   4

5.      GRANT OF RIGHTS; OFFERING.

        (a) The Board may from time to time grant or provide for the grant of
Rights to purchase Shares under the Plan to Eligible Employees in an Offering on
one or more Offering Dates selected by the Board. Each Offering shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of an Offering shall be incorporated by
reference into the Plan and treated as part of the Plan. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
Offering Memorandum or otherwise) the period during which the Offering shall be
effective, which period shall not exceed twenty-seven (27) months beginning with
the Offering Date, and the substance of the provisions contained in Sections 6
through 9, inclusive.

        (b) If a Participant has more than one Right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant will be
deemed to apply to all of his or her Rights under the Plan, and (ii) an
earlier-granted Right (or a Right with a lower exercise price, if two Rights
have identical grant dates) will be exercised to the fullest possible extent
before a later-granted Right (or a Right with a higher exercise price if two
Rights have identical grant dates) will be exercised.

6.      ELIGIBILITY.

        (a) Rights may be granted only to Employees of the Company or, as the
Board may designate as provided in subsection 3(b), to Employees one or more
Affiliates. Except as provided in subsection 6(b), an Employee shall not be
eligible to be granted Rights under the Plan unless, on the Offering Date, such
Employee has been in the employ of the Company or the Affiliate, as the case may
be, for such continuous period preceding such grant as the Board may require.

        (b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering Memorandum which coincides with the day on which such person
becomes an Eligible Employee or which occurs thereafter, receive a Right under
that Offering, which Right shall thereafter be deemed to be a part of that
Offering. Such Right shall have the same characteristics as any Rights
originally granted under that Offering, as described herein, except that, unless
otherwise determined by the Board:

               (i) the date on which such Right is granted shall be the
"Offering Date" of such Right for all purposes, including determination of the
exercise price of such Right;

               (ii) the period of the Offering with respect to such Right shall
begin on its Offering Date and end coincident with the end of such Offering; and

               (iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.




                                       4


<PAGE>   5


        (c) Unless otherwise specified in an Offering Memorandum, no Employee
shall be eligible for the grant of any Rights under the Plan if, immediately
after any such Rights are granted, such Employee owns stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or of any Affiliate. For purposes of this subsection
6(c), the rules of Section 424(d) of the United States Internal Revenue Code of
1986, as amended (the "Code"), shall apply in determining the stock ownership of
any Employee, and stock which such Employee may purchase under all outstanding
rights and options shall be treated as stock owned by such Employee.

        (d) Unless otherwise specified in an Offering Memorandum, an Eligible
Employee may be granted Rights under the Plan only if such Rights, together with
any other Rights granted under all employee stock purchase plans of the Company
and any Affiliates, as specified by Section 423(b)(8) of the Code, do not permit
such Eligible Employee's rights to purchase Shares or shares of any Affiliate to
accrue at a rate which exceeds twenty five thousand dollars ($25,000) of the
fair market value of such Shares (determined at the time such Rights are
granted) for each calendar year in which such Rights are outstanding at any
time.

7. RIGHTS; PURCHASE PRICE.

        (a) On each Offering Date, each Eligible Employee, pursuant to an
Offering made under the Plan, shall be granted the Right to purchase up to the
number of Shares purchasable either:

               (i) with a minimum and maximum percentage or percentages
designated by the Board (which need not be uniform throughout the Offering, but
any fluctuations in such percentages shall be applied equally to all Employees
participating in the Offering) not exceeding twenty percent (20%) of such
Employee's Earnings (as defined by the Board in each Offering) during the period
which begins on the Offering Date (or such later date as the Board determines
for a particular Offering) and ends on the date stated in the Offering, which
date shall be no later than the end of the Offering, which amount shall, as
specified in the Offering Memorandum for that Offering, be (1) withheld, in
whole or in part, from such Employee's Earnings during the period which begins
on the Offering Date (or such later date as the Board determines for a
particular Offering) and ends on the date stated in the Offering Memorandum for
that Offering, which date shall be no later than the end of the Offering and/or
(2) contributed in whole or in part by such Employee during such Offering, or

               (ii) with a maximum dollar amount designated by the Board that,
as the Board determines for a particular Offering, (1) shall be withheld, in
whole or in part, from such Employee's Earnings (as defined by the Board in each
Offering Memorandum) during the period which begins on the Offering Date (or
such later date as the Board determines for a particular Offering) and ends on
the date stated in the Offering, which date shall be no later than the end of
the Offering and/or (2) shall be contributed, in whole or in part, by such
Employee during such period.

        (b) The Board shall establish one or more Purchase Dates during an
Offering on which Rights granted under the Plan shall be exercised and purchases
of Shares carried out in accordance with such Offering.




                                       5


<PAGE>   6

        (c) In connection with each Offering made under the Plan, the Board may
specify a maximum amount of Shares that may be purchased by any Participant as
well as a maximum aggregate amount of Shares that may be purchased by all
Participants pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board may specify a
maximum aggregate amount of Shares which may be purchased by all Participants on
any given Purchase Date under the Offering. If the aggregate purchase of Shares
upon exercise of Rights granted under the Offering would exceed any such maximum
aggregate amount, the Board shall make a pro rata allocation of the Shares
available in as nearly a uniform manner as shall be practicable and as it shall
deem to be equitable.

        (d) Unless otherwise determined by the Board, the purchase price of
Shares acquired pursuant to Rights granted under the Plan shall be not less than
the lesser of:

               (i) an amount equal to eighty-five percent (85%) of the fair
market value of the Shares on the Offering Date; or

               (ii) an amount equal to eighty-five percent (85%) of the fair
market value of the Shares on the Purchase Date.

8.      PARTICIPATION; WITHDRAWAL; TERMINATION.

        (a) An Eligible Employee may become a Participant in the Plan pursuant
to an Offering by delivering an enrollment form to the Company within the time
specified in the Offering Memorandum, in such form as the Company provides. Each
such agreement shall authorize payroll deductions of up to the maximum
percentage specified by the Board of such Employee's Earnings during the
Offering (as defined in each Offering). The payroll deductions made for each
Participant shall be credited to a bookkeeping account for such Participant
under the Plan and either may be deposited with the general funds of the Company
or may be deposited in a separate account in the name of, and for the benefit
of, such Participant with a financial institution designated by the Company. To
the extent provided in the Offering, a Participant may reduce (including to
zero) or increase such payroll deductions. To the extent provided in the
Offering, a Participant may begin such payroll deductions after the beginning of
the Offering. A Participant may make additional payments into his or her account
only if specifically provided for in the Offering Memorandum and only if the
Participant has not already had the maximum permitted amount withheld during the
Offering.

        (b) At any time during an Offering, a Participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board in the Offering Memorandum. Upon such
withdrawal from the Offering by a Participant, the Company shall distribute to
such Participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire Shares for the
Participant) under the Offering, without interest unless otherwise specified in
the Offering Memorandum, and such Participant's interest in that Offering shall
be automatically terminated. A Participant's withdrawal from an Offering will
have no effect upon such Participant's eligibility to participate




                                       6

<PAGE>   7


in any other Offerings under the Plan but such Participant will be required to
deliver a new participation agreement in order to participate in subsequent
Offerings under the Plan.

        (c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating Employee's employment
with the Company and its designated Affiliates for any reason (subject to any
post-employment participation period required by law) or other lack of
eligibility. The Company shall distribute to such terminated Employee all of his
or her accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire Shares for the terminated Employee) under
the Offering, without interest unless otherwise specified in the Offering
Memorandum. If the accumulated payroll deductions have been deposited with the
Company's general funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated payroll deductions
have been deposited in a separate account with a financial institution as
provided in subsection 8(a), then the distribution shall be made from the
separate account, without interest unless otherwise specified in the Offering
Memorandum.

        (d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in Section 15 and, otherwise during his
or her lifetime, shall be exercisable only by the person to whom such Rights are
granted.

9.      EXERCISE.

        (a) On each Purchase Date specified in the relevant Offering Memorandum,
each Participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of Shares up to the maximum amount of Shares
permitted pursuant to the terms of the Plan and the applicable Offering, at the
purchase price specified in the Offering Memorandum for that Offering. No
fractional Shares shall be issued upon the exercise of Rights granted under the
Plan unless specifically provided for in the Offering and permitted by law.

        (b) As no fractional Shares shall be issued upon the exercise of Rights,
unless otherwise specifically provided in the Offering Memorandum, the amount,
if any, of accumulated payroll deductions remaining in any Participant's account
on the final Purchase Date of the Offering after the purchase of the whole
Shares pursuant to subsection 9(a) shall be distributed in full to the
Participant at the end of the Offering, without interest. If the accumulated
payroll deductions have been deposited with the Company's general funds, then
the distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subsection 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.

        (c) The amount, if any, of accumulated payroll deductions remaining in
any Participant's account after the purchase of Shares that is less than the
amount required to purchase one whole Share on the final Purchase Date of the
Offering shall be carried forward, without interest, into the next Offering.




                                       7


<PAGE>   8

        (d) No Rights granted under the Plan may be exercised to any extent
unless the Shares to be issued upon such exercise under the Plan (including
Rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act and the Plan is in material compliance with all
applicable state, foreign and other securities and other laws applicable to the
Plan. If on a Purchase Date in any Offering hereunder the Shares are not so
registered or the Plan is not in such compliance, no Rights granted under the
Plan or any Offering shall be exercised on such Purchase Date, and the Purchase
Date shall be delayed until the Shares are subject to such an effective
registration statement and the Plan is in such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If, on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Shares are not registered and the Plan is not in
such compliance, no Rights granted under the Plan or any Offering shall be
exercised and all payroll deductions accumulated during the Offering (reduced to
the extent, if any, such deductions have been used to acquire Shares) shall be
distributed to the Participants, without interest unless otherwise specified in
the Offering Memorandum. If the accumulated payroll deductions have been
deposited with the Company's general funds, then the distribution shall be made
from the general funds of the Company, without interest. If the accumulated
payroll deductions have been deposited in a separate account with a financial
institution as provided in subsection 8(a), then the distribution shall be made
from the separate account, without interest unless otherwise specified in the
Offering Memorandum.

10.     COVENANTS OF THE COMPANY.

        (a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the amount of Shares required to satisfy such Rights are
available.

        (b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell Shares upon exercise of the
Rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Shares under the Plan, the Company shall be relieved from any liability for
failure to issue and sell Shares upon exercise of such Rights unless and until
such authority is obtained.

11.     USE OF PROCEEDS FROM SHARES.

        Proceeds from the sale of Shares pursuant to Rights granted under the
Plan shall constitute general funds of the Company.

12.     RIGHTS AS A STOCKHOLDER AND EMPLOYEE.

        (a) A Participant shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to, Shares subject to Rights granted
under the Plan unless and until the Participant's Shares acquired upon exercise
of Rights under the Plan are recorded in the books of the Company.





                                       8


<PAGE>   9

        (b) Neither the Plan nor the grant of any Right thereunder shall confer
any right on any Employee to remain in the employ of the Company or any
Affiliate or restrict the right of the Company or any Affiliate to terminate
such Employee's employment.

13.     ADJUSTMENTS UPON CHANGES IN SECURITIES.

        (a) Subject to any required action by the stockholders of the Company,
the number of Shares covered by each Right under the Plan that has not yet been
exercised and the number of Shares that have been authorized for issuance under
the Plan but have not yet been placed under a Right (collectively, the
"Reserves"), as well as the price per Share covered by each Right under the Plan
that has not yet been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock split
or the payment of stock dividend (but only on the Common Stock) or any other
increase or decrease in the number of Shares 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 issue 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 subject to a Right.

        (b) In the event of the proposed dissolution or liquidation of the
Company, any and all Offerings shall terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Board.
The Board may, in the exercise of its sole discretion in such instances, declare
that the Rights under the Plan shall terminate as of a date fixed by the Board
and give each Participant the right to exercise his or her Right. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger or consolidation of the Company with or into another corporation or a
parent or subsidiary of such successor corporation when the Company is not the
surviving corporation, or a reverse merger in which the Company is the surviving
corporation but the Shares outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, any and all Offerings shall terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board. The Board may, in the exercise of its sole discretion in such
instances, and in lieu of assumption or substitution of the Rights, provide that
each Participant shall have the right to exercise his or her Right. If the Board
makes a Right exercisable in lieu of assumption or substitution in the event of
a merger or sale of assets, the Board shall notify the Participant that the
Right shall be fully exercisable for a period of twenty (20) days from the date
of such notice (or such other period of time as the Board shall determine), and
the Right shall terminate upon the expiration of such period.

        (c) The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per Share covered by each outstanding Right, in the event that the Company
effects one or more reorganizations, recapitalizations, rights offering, or
other increases or reductions of outstanding Shares, and in the event of the
Company being consolidated with or merged into any other corporation.





                                       9


<PAGE>   10

14.     AMENDMENT OF THE PLAN.

        (a) The Board at any time, and from time to time, may amend the Plan.

        (b) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to comply with applicable
law.

        (c) Rights and obligations under any Rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan without the consent
of the person to whom such Rights were granted, or except as necessary to comply
with any laws or governmental regulations.

15.     DESIGNATION OF BENEFICIARY.

        (a) A Participant may file a written designation of a beneficiary who is
to receive any Shares and/or cash, if any, from the Participant's account under
the Plan in the event of such Participant's death subsequent to the end of an
Offering but prior to delivery to the 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 during an Offering.

        (b) The Participant may change such designation of beneficiary 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 sole 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.

16.     TERMINATION OR SUSPENSION OF THE PLAN.

        (a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the Shares available for issuance under the Plan, as increased and/or adjusted
from time to time, have been issued under the terms of the Plan. No Rights may
be granted under the Plan while the Plan is suspended or after it is terminated.

        (b) Rights and obligations under any Rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan (including any Offering Memorandum) or with the
consent of the person to whom such Rights were granted, or except as necessary
to comply with any laws or governmental regulation.

17.     TAX WITHHOLDING AND OTHER TAXES AND CONTRIBUTIONS

        (a) The Company and any Affiliate whose Employees are Eligible Employees
shall withhold from each Participant's earnings or other amounts payable to the
Participant income



                                       10


<PAGE>   11

tax, social security taxes and other taxes required or, if the Company or such
Affiliate so chose, permitted, to be withheld with respect to such amounts under
applicable law. The Participant shall be liable for all such amounts. In the
event the Company or an Affiliate does not withhold such taxes or a
Participant's earnings are insufficient to satisfy such withholding, the Company
or an Affiliate shall have the right to effect the sale of such Participant's
Shares on behalf of the Participant and pay the proceeds to the Company or to
the Affiliate, retain amounts that have been deducted from payroll and would
otherwise be used to purchase Shares, withhold such taxes from amounts otherwise
due to the Participant, or take any other action that they deem necessary to
cause the Participant to fulfill such obligation.

        (b) It is a condition of the grant of Rights to a Participant under the
Plan that the Participant agrees to indemnify the Company and its Affiliates in
respect of any secondary national insurance contributions payable by any of them
on the exercise of the Option. Accordingly, no Right may be exercised under the
Plan until the Participant has put the Company or the relevant Affiliate (as the
case may be) in sufficient funds (which shall be determined by the Company or
the relevant Affiliate (as appropriate)) to meet any obligation of the Company
or the relevant Affiliate to account for income tax chargeable under the PAYE
system or national insurance contributions (both primary and secondary,
including, for the avoidance of doubt, amounts covered by the indemnity in this
Section 17(b)). The Company or the relevant Affiliate (as appropriate) may, in
lieu of the Participant providing cash funds to the relevant company, sell at
the best price which it can reasonably obtain such number of Shares allotted to
the Participant as will provide it with an amount necessary to discharge the
Participant's obligation under this Section 17(b).

        (c) The Company or the relevant Affiliate (as appropriate) shall use
reasonable endeavours (with the Participant's assistance if required) to agree
with the United Kingdom Inland Revenue the amount of any such income tax or
national insurance contributions in advance of any Shares being issued to
Participant following the exercise of Rights. In the event that any funds made
available are less than or greater than the amount needed to meet any obligation
of the relevant company to account for income tax or other amounts that are
chargeable under the PAYE system and national insurance contributions in
relation to the exercise of the relevant Rights, an appropriate payment shall be
made by the Participant to the relevant company, or vice versa, as appropriate.

18.     EFFECTIVE DATE OF PLAN.

        The Plan shall become effective upon adoption by the Board.

NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN HISTORY

        Adopted July 13, 2001.



                                       11

</TEXT>
</DOCUMENT>
</SUBMISSION>
