STOCKREPORTS

Cadence Design Systems, Inc.

NYSE Symbol CDN In S&P MidCap 400

Recent Price 40.00 52 Wk Range 43.88 - 27.00

Yield Nil 12-Mo. P/E 97.6

Quantitative Evaluation: Outlook (1 Lowest - 5 Highest) 4- Fair Value 50.20 Risk HIGH Earn/Div Rank B
Technical Evaluation: BEARISH since 03/97 Rel. Strength Rank (1 Lowest - 99 Highest) 84 Insider Activity NA

Overview 05-MAY-97

Revenues should rise approximately 20% in 1997, reflecting improved systems business sales and greater contributions from consulting. Although these areas should record robust gains, we see Cadence's service offerings as the major growth driver in the near term. Service revenues, which were up over 74% in 1996, should continue to show rapid growth as the company's client base increases. In addition, the service business creates a predictable, long-term revenue stream that should help to offset any decline in new product sales. The greater proportion of services in the revenue mix will put pressure on gross margins, but this will be offset by the leveraging of operating expenses. Recent acquisitions may dilute results slightly. Overall, EPS should increase to $1.70 in 1997 from 1996's $1.40 before non-recurring items.

Valuation 05-MAY-97

The shares fell sharply in March and April 1997, on fears that the company's growth will slow. We do not view the decline as a buying opportunity. Cadence's year-to-year revenue growth in the first quarter was its slowest in several periods. Although we look for growth to return to historical rates shortly, the situation still concerns us. Although we do not recommend adding to positions at this time, the shares are a worthwhile holding for aggressive investors with an above-average tolerance for risk. Long-term earnings growth will be enhanced by a technology shift to 0.35-micron linewidths, which will allow chipmakers to integrate highly complex systems on a single integrated circuit (IC). This will result in growing demand for software and services that can help chipmakers design high-performance ICs.

Key Stock Statistics

Fiscal Year Ending Dec. 31

Dividend Data: Cadence has never paid cash dividends.

Business Summary 05-MAY-97

In its 1995 annual report, the company indicated that if you asked an employee four years ago what Cadence does, that person would have said, "We make tools for people who design integrated circuits." Ask that same question today and you will hear, "We provide services and software that help people meet their product development goals." Cadence is the largest supplier of electronic design automation (EDA) software. Cadence's sophisticated EDA tools are used to develop circuits and systems that allow customers to manufacture increasingly complex electronic products with accelerated time-to-market schedules. Such services greatly enhance a customer's competitive position.

Cadence works with its customers to turn concepts into successful products. This requires partnering with customers to understand their design needs, explore options, and carefully evaluate the trade-offs before choosing the best path. The company's customers include several prestigious technology concerns, including semiconductor companies such as Intel and Motorola; computer systems vendors such as Sun Microsytems, Silicon Graphics and Compaq; and telecommunications providers such as Cisco Systems and 3Com.

Cadence derives its revenues from sales of its software products and the service and maintenance of its products. If the company is successful in continuing to grow its product revenues, it will get an extra benefit from a steady and growing stream of service revenues related to the higher product revenues.

Cadence believes no major competitor can match its offerings for the electronic engineering market in as comprehensive a fashion. Furthermore, Cadence feels the infrastructure it has put into place over the last three years has given it a significant lead over competitors that would attempt to emulate its business model of providing a comprehensive line of software tools and an experienced support staff.

Cadence recently completed the acquisition of High Level Design Systems, Inc. The proposed acquisition of Cooper & Chyan Technology Inc. is currently pending. Cadence believes the acquired companies, while small, will enhance its development of important technologies.

Capitalization

Long Term Debt: $2,398,000 (3/97).
Minority Interest: $1,701,000 (3/97).

Curr. Ratio	2.1	1.0	1.2	1.9	2.6	2.0	2.9	2.7	2.8	4.1
% LT Debt of Cap.	4.4	1.1	1.2	1.9	2.3	1.9	4.6	7.9	4.1	3.9
% Net Inc.of Revs.	4.0	17.8	8.5	NM	12.7	NM	16.4	19.4	19.5	13.2
% Ret. on Assets	5.4	26.5	10.9	NM	15.1	NM	18.7	21.8	17.9	10.0
% Ret. on Equity	10.4	62.8	20.0	NM	24.6	NM	28.1	32.8	25.2	25.0

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--555 River Oaks Parkway, San Jose, CA 95134. Tel--(408) 943-1234. Chrmn--D. L. Lucas. Pres & CEO--J. B. Costello. EVP, CFO & Secy--H. R. Bingham. VP-Fin, Treas & Investor Contact--Stephen Y. Fong. Dirs--C. Bartz, J. B. Costello, H. E. Johnston, R. J. Lane, L. Y. W. Liu, D. L. Lucas, A. Sangiovanni-Vincentelli, G. M. Scalise, J. R. Shoven, J. E. Solomon. Transfer Agent--Harris Trust & Savings Bank, Chicago. Incorporated--in Delaware in 1987. Empl-- 3,000. S&P Analyst: Stephen T. Madonna, CFA

This report is for information purposes and should not be considered a solicitation to buy or sell any security. Neither S&P nor any other party guarantee its accuracy or make warranties regarding results from its usage. Redistribution is prohibited without written permission. Copyright © 1997