Lisa Ewbank – VP IR Aart de Geus - CEO Brian Beattie - CFO

Rich Valera – Needham & Company Raj Seth – Cowen & Company Matthew Petkun – DA Davidson Jay Vleeschhouwer – Merrill Lynch Terence Whalen - Citigroup Mahesh Sanganeria – RBC Capital Markets

Welcome to the Synopsys, Inc. earnings conference call for the third quarter of fiscal year 2008. (Operator Instructions) At this time I would like to turn the call over to Lisa Ewbank, Vice President of Investor Relations.

Good afternoon everyone. With us today are Aart de Geus, Chairman and CEO of Synopsys, and Brian Beattie, Chief Financial Officer. During the course of this conference call Synopsys may make forecasts, targets and other forward-looking statements regarding the company and its financial results. While these statements represent our best current judgment about future results and performance as of today, the company’s actual results and performance are subject to significant risks and uncertainties that could cause actual results to differ materially from those that may be projected. In addition to any risks that we highlight during this call, important factors that may affect our future results are described in our Form 10-K, our Form 10-Q for the second quarter and in our earnings release for the third quarter issued earlier today. In addition, all financial information to be discussed on this conference call, as well as the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures and supplemental financial information can be found in our third quarter earnings release and financial supplement. All of these items are currently available on our website at www.synopsys.com. With that, I will turn the call over to Aart de Geus.

Good afternoon, I’m happy to report another solid quarter for Synopsys. Revenue came in at $344 million, above our target range, with over 90% time-based license revenue. We managed expenses well, holding spending to the low end of our range and we delivered above target non-GAAP earnings growth of 37% yielding $0.44 per share. We are raising non-GAAP earnings guidance and expect to come in $0.08 to $0.11 higher then we anticipated at the beginning of 2008. Our technology is very strong and competitively we are clearly pulling ahead in both customer success and business execution. Before moving to the quarter’s highlights let me comment on the customer on EDA environment. The marketplace today is sending mixed signals. While chip volumes are increasing ASP pressure has been top of semiconductor growth. Lately though manufacturing capacity has begun to tighten up and the first half semiconductor results came in better than many expected. In this uncertain landscape we see some customers racing forward to gain market share while others are holding back on their forward commitments. One common theme is caution and selectivity in choosing suppliers they can count on for the future. While challenging for the EDA industry overall, this is positive for Synopsys being recognized as technically and financially very strong. Indeed many companies who rely on us including those who have selected Synopsys as their primary partner, are seeing superior productivity benefits and overall appear to be doing well themselves. Even against the backdrop of increased caution and lengthening sales cycle, Synopsys delivered strong results again and we are increasing out outlook for the rest of the fiscal year. With the 2009 market uncertainty in mind though, we are proactively outperforming on Ops margin already in 2008. A better 2008 finish helps us enter 2009 in a very solid position with the objective to deliver continued strong earnings even with more moderate revenue growth. Once we complete our 2009 planning we will provide detailed guidance with our next earnings report. Based on backlog, pipeline, recent customer interactions and the visible struggles of our competitors we are assuming a revenue growth rate of approximately 6% to 7%. With a focus on market share gains and continued Ops margin expansion; we estimate growing earnings in to the $1.70 to $1.80 range. If the semiconductor landscape improves all the better. Meanwhile we’re making excellent competitive headway as our product differentiation is positively impacting our business. Not only did we recently announce that National Semiconductor selected us as their key EDA supplier, and is partnering with us on our new analog mixed signal design solution, we also have a number of customers seeking our help and [taping] out chips which have overwhelmed competitors tools. Clearly Synopsys is mission critical for their success and we are supporting them well during this time of uncertainty. That brings me to the product and technology highlights for the quarter. Technology is at the core of our differentiation and this year we’re doing particularly well with our existing product portfolio and in delivering a steady stream of new capability. In core EDA both digital and analog mixed signal are gaining competitive strength. Starting with our digital solutions, IC Compiler is especially strong and is systematically replacing competitors’ tools at a number of customers. During the Design Automation Conference in June, Intel, TI ASIC, SD, Toshiba and ARM, presented testimonials about their excellent results using IC Compiler. These companies are seeing significantly faster turnaround time and quality of results for their advanced high performance chips. Another example is MediaTek known for its wireless and digital media solutions, MediaTek adopted IC Compiler for its next generation 65nm design. Also at DAC we demonstrated our newest multi core capability to standing room only crowds. Products included PrimeTime, Design Compiler, and as a special surprise to our customers or new router, Zroute. Zroute is a brand new multi threaded router developed from the ground up and integrated into IC Compiler. It has delivered a 10x increase in speed, its easy to use and its [inaudible] for manufacturing friendly results. It is notable that at its introduction Zroute had already completed its first production tape out attesting to its great new capabilities and robustness. We also continued to deliver enhancements throughout our low power flow including low power reference flows for the 45nm common platform process as well as for [UMCs] 65nm technology. One example of low power success was at Oticon the leader in development of power sensitive hearing aids. Oticon used IC Compiler’s unique low power optimizations in taping out its next generation DSP chip sets. Together with ARM and [inaudible] we also announced industry’s first comprehensive low power verification solution. The new verification methodology captures the expertise of all three companies and enables customers to more rapidly and broadly adopt best practices for low power designs. The integration of Synplicity is starting with positive momentum as well. During the quarter we introduced great new functionality in SPGA designs including new physical synthesis and significant quality of results improvements for [inaudible] SPGA devices. After barely three months of integration we can already confirm that Synplicity brought to Synopsys a very strong team, excellent technology and an expanded customer base. Most importantly business is right on track. On the analog mixed signal side we’re seeing accelerated adoption of our XA technology which combines the speed of HSPICE with the accuracy of SPICE. This quarter four new customers used XA in their production flows. Let me also give you an update on our highly anticipated new custom design solution. We are perfectly on track for launch this quarter. The demos at DAC had the highest attendance and received the highest scores. Our bigger partners are quite enthusiastic about the core technologies, ease of use, and ease of adoption and robustness of the product. Stay tuned for more details shortly. Now let me turn to our adjacencies, systems and manufacturing. In systems we had a solid quarter for the IP business and for our new ASIC rapid prototyping system. We saw continued product momentum with the release of new digital IP titles including a SATA device controller which completes that IP family. We also announced a major addition to our PCI express family and added TSMC 40nm and 45nm library to our design ware library portfolio. In mixes signal IP product accomplishments included the tape out of a new TSMC analog USB core and the release of new DDR capabilities. Demand for our [Confirma] rapid prototyping system is high as well as customers are beginning to migrate to our off the shelf solution rather then make their own costly custom boards. During the quarter we announced hardware and software enhancements including the much anticipated Identify Pro debug technology and market expanding interface applications such as PCI Express and SATA. In manufacturing our TCAB solutions are finding increasingly broad end markets. They are recognizing the benefits of our nanoscale simulation technology. Kodak, the world leader in image sensors adopted our TCABs to support its research and development of new products as high image resolution requires very complex simulations. In the Mask area we introduced a new release of Proteus which delivers key ease of use features and further flow integration enabling concurrent processing of manufacturing applications. In summary Synopsys is executing very well notwithstanding the turbulent landscape around us. We see four key elements contributing to our strong outlook; excellent technology and product pipeline with visible competitive momentum, strong scalable global customer support executing well on a growing number of primary vendor collaborations, a conservative time-based business model that helps us navigate in uncertain waters while supporting investments for future growth and finally a strong and motivated team focused on growing our value to our customers. With that I’ll turn the call over to Brian Beattie, our CFO.

Thank you Aart and good afternoon everyone. In my comments today I will summarize our financial results for the quarter and provide you with our 2008 guidance. As a reminder, I will be discussing certain GAAP and non-GAAP measures of our financial performance. We have provided reconciliations in the press release and financial supplement posted on our website. In my discussions all of my comparisons will be year-over-year unless I specify otherwise. As Aart mentioned, Q3 financial results were solid. We delivered double-digit growth in both revenue and earnings, generated considerable operating cash flow and expanded non-GAAP operating margins, all under a consistent business model. Let me now provide some additional detail on our financials. Total revenue increased 13% to $344 million above our target with strength across many areas of the business. Our core EDA platform continues to perform well and achieve double-digit revenue growth for the trailing four quarters. As expected Synplicity revenue contribution was fairly modest primarily reflecting the purchase accounting haircut that’s applied to the deferred revenue. One customer accounted for slightly more then 10% of our third quarter revenue. Turning to expenses, total non-GAAP costs and expenses were $261.5 million, an expected increase due mainly to our Synplicity acquisition but at the low end of our target range due to timing of expenses and overall cost control. As a result non-GAAP operating margin was 24% during the quarter, an increase of more than 500 basis points. Turning now to earnings, GAAP earnings per share were $0.39 with costs and expenses totaling $294 million. This included $11 million of amortization of our intangible assets, $17 million of share based compensation, and $4.8 million of IP R&D associated with Synplicity and a one-time $17 million GAAP only tax benefit associated with the IRS settlement that we first announced in December of 2007. We are pleased that we resolved this $477 million tax issue for fiscal years 2000 and 2001. Now in a similar vein as part of a routine examination of 2002 to 2004 returns, the IRS recently proposed adjustments which would total approximately $250 million in additional taxes primarily associated with our acquisition of Avanti. As with the previous case we filed a protest, we believe the claim is without merit and that we are fully reserved. As you know resolution of these routine issues can typically take a long time and we’ll provide more details in our third quarter 10-K to be filed next month. Now turning back to earnings, non-GAAP earnings per share increased 37% to $0.44 exceeding our target range. As a result of this solid execution we are raising our annual earnings guidance. Our non-GAAP tax rate was approximately 25%, slightly below our target range. For the entire year we continue to expect a non-GAAP tax rate of approximately 26% which does not assume renewal of the R&D tax credit in the United States. Given our predictable business model, revenue visibility remains strong and we continue to execute well on contract mix. Upfront revenue was 6% of total, within our target range of less then 10% and as expected greater then 90% of Q3 revenue came from beginning of quarter backlog. The average length of our renewable customer license commitments for the quarter was again approximately three years. Now turning to our cash and balance sheet items, cash and short-term investments totaled $877 million up $60 million sequentially even with our all cash purchase of Synplicity during the quarter. We generated $231 million in cash from operations including an expected annual payment from a large customer. Capital expenditures were $7 million. We did not repurchase stock in the quarter and have approximately $260 million remaining on our current authorization. And as always we’ll evaluate the best uses of cash each quarter including company operations, investments and stock repurchases. Q3 net accounts receivable totaled $144 million and we maintained industry leading DSOs of 38 days reflecting the high quality of our AR portfolio and the timing of invoices. Deferred revenue at the end of the quarter was $657 million, an expected sequential increase due to the large annual payment I mentioned earlier. We ended Q3 with approximately 5,650 employees, a year-over-year and sequential increase due primarily to our acquisition of Synplicity. Before moving on to guidance let me provide some additional commentary around Synplicity. The acquisition has been enthusiastically received by our customers and integration efforts are progressing well from a business process and employee perspective. For reporting purposes, you’ll notice we’ve adjusted our financial supplement to reflect the inclusion of Synplicity in the appropriate product groups. Within core EDA, we’ve added the Synplicity products associated with FPGA design. Within IP and systems, we’ve added the products associated with ASIC rapid prototyping and DSP. Now moving on to guidance. For the fourth quarter of FY08, are targets are: revenue between $348 million and $356 million, total GAAP costs and expenses between $295 million and $310 million which includes approximately $13 million of share based compensation expense, total non-GAAP costs and expenses between $273 million and $283 million, other income and expense between zero and $3 million, a non-GAAP tax rate of approximately 27%, outstanding shares between 147 million and 152 million, GAAP earnings of $0.23 to $0.29 per share, and non-GAAP earnings of $0.36 to $0.39 per share. And we expect greater then 90% of the quarter’s revenue to come from backlog. Now our fiscal 2008 outlook, we’re raising the bottom end of our revenue range with our new target between $1.332 billion and $1.340 billion, a non-GAAP tax rate of approximately 36%, outstanding shares between 147 million and 150 million, GAAP earnings per share between $1.20 and $1.26 which includes the impact of approximately $64 million in share based compensation expense. Non-GAAP earnings per share of $1.65 to $1.68. We’ve increased the low end of our guidance by $0.05 and the top end of the guidance range by $0.04. And now that we’re in our fourth quarter we’ve refined our cash flow from operations target to $300 million to $325 million. We will provide 2009 guidance in our next earnings call reporting our fourth quarter results. To conclude I’m pleased with another quarter of consistent execution and solid financial results, highlighted by top and bottom line growth, operating margin expansion, and solid cash flow generation. With that we are now ready for questions.

(Operator Instructions) Your first question comes from the line of Rich Valera – Needham & Company Rich Valera – Needham & Company: I wanted to get your thoughts on the incremental change in the environment, it sounds from your comments that on the margin over the last three months, things have gotten a little more challenging in the EDA space, just wanted to get your color on that. Also last quarter you were good enough to provide some preliminary fiscal 2009 guidance and just wanted to get your thoughts on that, get your feel for how you feel about that guidance at this point.

You characterized it correctly, I think it’s incremental. We are certainly not in the school of saying there are very massive changes suddenly occurring. I do think that the entire semiconductor industry is looking forward saying; well what happened to the overall economy and when will that really hit us, but meanwhile keeps delivering all and all reasonable quarters. And so on the basis of reasonably okay results but a careful look, people are cautious as they commit going forward and we see some customers nervous towards committing for a long period of time. Now clearly that has had some impact on the EDA industry although I think a number of the changes that you saw recently were only marginally related to the economy, we have picked up a number of these signs and therefore are a bit careful ourselves and someone asked a few quarters ago if we picked up the slightest signs would we immediately take some action on the expense side, well we already did. And in that sense, we are preparing well for the coming year. I gave in the preamble some initial indications of our planning right now assuming a 6% to 7% revenue growth and our initial estimates of the non-GAAP EPS to be in $1.70 to $1.80 range. Bear in mind we haven’t finished our planning. There are a lot of things changing but overall we are just doing incredibly well I think in what appears to be a very turbulent EDA industry and certainly somewhat turbulent semiconductor industry. Rich Valera – Needham & Company: With respect to the cash from operations what was the driver for taking that down a bit from the $325 to the $300 to $325 million?

As we’re now approaching of course deep into the fourth quarter and getting ready for year end, we’re just looking at refining our cash flow from operations targets slightly so we’re still working hard to bring it in, but given that it’s the end of the year and if you look at timing of payments and collections we just wanted to align it properly with our current forecast.

Your next question comes from the line of Raj Seth – Cowen & Company Raj Seth – Cowen & Company: As you look into 2009 how should we think about, I know its preliminary, but how should we think about cash flow in 2009 and as it related to bookings in the current quarter, did bookings come in as you expected or were they a little weaker? Are you anticipating in the fourth quarter slightly weaker bookings then you might have forecast three months ago given the commentary on the environment?

On the cash flow for 2009, what we’re looking at there, we haven’t provided all the final details of the profile but the biggest element to track is the net income item and as you look at that and look at the effective tax rates we’ve been able to produce, that’s a pretty good representation for us relative to this year’s performance, our operating cash flow. So other then that when you look at balance sheets and what come in the quarter, what gets deferred and things, the net income is the most consistent element to track on a year-over-year basis. And we’ll give you all the details of that in three more months when we do our year end call. Raj Seth – Cowen & Company: How should we as we exit this year think about backlog given the large Intel deal some time ago? What’s the appropriate way to think about how backlog should look coming out of this year?

We’ll provide the specific numbers for the backlog at the end of this year and then from there of course you see the levels of revenue and bookings associated with it and I think the most important item to remember is that we continue to enter each quarter with more than 90% of the quarter locked up and then we also have each year approach the coming year with more then 80% of the incoming year relative to the amount of bookings coverage and revenue coverage that we have and we’re not anticipating 2009 to be any different. We’re right on track for that. Raj Seth – Cowen & Company: So given all that, should backlog go up?

Yes, that’s the answer we’ll be giving you in December. We’re working it through. We don’t comment quarterly on the bookings or the backlog impact, but again we’re working hard to work on it. We’ll give you the final answers as we exit the fourth quarter with all the year wrapped up.

We don’t comment on the bookings of the quarter but let me comment that for the year we’re looking that we’re on track against our plans. So in that sense there’s nothing out of the ordinary. We did pick up though with a number of customers suddenly that just the sheer number of signatures was increasing. We saw a number of places that the process took longer and that people were although worried about the out years, and so what tells us is that people are just cautious about how they look at the longer term and we want to make sure that we keep signing up run rate growth business and that’s why we are tempering a little bit our expectations for 2009. But having said that the more I see the announcements around us, the better I feel about the position that we have and having seen how well the technology is doing at a number of places as people become more selective, I think Synopsys tends to bubble up to the top of their choice list.

Your next question comes from the line of Matthew Petkun – DA Davidson Matthew Petkun – DA Davidson: The sequential increase in the upfront revenues, would you associate that, is much of that associated with the Synplicity business?

Yes. Brian is probably better equipped to answer this question, I hadn’t even noticed that there was a significant uptick there. Synplicity is a little bit more upfront then what we have but I think over time that will just blend in to the rest of our business anyway.

And from a data point perspective its at 6%, our target is to maintain it at less then 10% and 6% is exactly what we hit for last year’s upfront ratio. So no change there. And then just looking at timing of it in Q1 and Q2 it ran about 4%, we’d anticipate it being in the 5% to 6% range for the total year inclusive of Synplicity which has the hardware element in there which will be taken upfront. Matthew Petkun – DA Davidson: I know its difficult to talk about the pricing environment, but is there any reason given the blood in the water that we’ve seen in other elements of this space why you might want to be more aggressive with pricing in this current environment?

I think the blood in the water description is somewhat accurate in a time of a lot of change. Let me immediately focus, that the move of one of our major competitors towards a ratable model I think is a very, very positive. I think it’s a much healthier business model for the industry. I wouldn’t be surprised that over time more people were to go there. Having said that I think most of our growth and opportunities lies with the fact that we just have stellar technology right now and that we’re really seeing the difference and so from that perspective, yes, we can be aggressive. From the perspective of pricing, at the end of the day we make sure that we grow our run rates, that is what in the long-term will grow our business and obviously we can work the flexibility but jumping to pricing, its hard to jump back away from it later so I think we’re prudent and conservative there. Matthew Petkun – DA Davidson: The implied non-GAAP guidance for next year, what tax rate are you assuming for those earnings?

We’ve assumed a 28% tax rate.

Your next question comes from the line of Jay Vleeschhouwer – Merrill Lynch Jay Vleeschhouwer – Merrill Lynch: First a clarification on Q3, can you comment on the sequential increase in Japan, was that too related to the Synplicity acquisition or perhaps was it carry over from previous quarters Synopsys bookings?

Our performance in Japan was very strong and in fact you can see 22% growth over our last four quarters in Japan. But revenue by product platform or even geography does tend to fluctuate a little bit from quarter to quarter based on the mix of those contracts. In the quarter there was a couple of due and payables that came in to Japan consistent with the way a number of those accounts have been handled in the past and we’re right on track with that, so other then that, real happy with the performance in Japan. Jay Vleeschhouwer – Merrill Lynch: Are the DC and IC Compiler releases still on track for next month as you commented at DAC and similarly is the new release of PrimeTime still set for December?

Very simply put the answer is yes. I think things are actually moving along very nicely in technology and the products that you mentioned obviously are our core anchor products in our business. I have an interesting little side note because you will recall that about three years ago we said that 80% of [Astra] would be replaced by IC Compiler and so this morning I asked the team where we were, it turns out that we are a bit over 75% overall and for all the advanced nodes, 90nm and below, we’re well above that. And so I think IC Compiler has done very, very well in the last couple of years. Jay Vleeschhouwer – Merrill Lynch: So given that penetration rate when you look into 2009 and 2010, what’s next then do you think in terms of the most incremental product growth drivers in terms of licenses or contributors to growing the pools for run rate purposes?

We do have some stellar technology advancements. I mentioned Zroute which is interesting because its really one of the core modules that I think about makes a big difference that is now going to be rolled out substantially to a number of people. We also actually see that the adoption rate of IC Compiler specifically is continuing at a number of customers where we are over time replacing other competitors. So from that perspective alone, I think there’s, the core EDA will remain very strong for us and of course that’s good news because that’s such a large portion of our business. Jay Vleeschhouwer – Merrill Lynch: With respect to other market indicators do you still feel that semi R&D is perhaps the closest albeit imperfect proxy, what else would you be looking at?

I think both the word closest and imperfect apply here as we have said for a long time because the, in many ways the R&D investments are the ones that have the longest timeframe even with volume or ASPs going up and down the one thing that doesn’t change all that much is the number of engineers working on advanced chips, so from that perspective the high degree of stability. At the same time it’s very clear that some of the R&D investments are changing in the semiconductor industry by virtue of a number of companies getting out of the manufacturing and the new technology development themselves. We should only hope that some of that money will be used to [inaudible] more on the design side which is good for us. Some of that money is also clearly going towards essentially efficiency for the semiconductor industry. And you see many other changes to that effect. So we’re sitting in the middle of that with customers that are a bit nervous and yet at the same time have to commit for multi years and so they are looking at us in terms of not only the present strength of technology but also the pipeline going forward and being strongly anchored in the future nodes already I think suits us very, very well as they make their decisions. Jay Vleeschhouwer – Merrill Lynch: If the environment were to worsen before it gets better how do you think that might manifest itself in terms of contract durations, can you hold three years? Do you think you might see a preference towards shorter or even perhaps longer because of the consolidation affect?

First a premise, at this point in time I do not see it worsening a lot. I think one could see turbulence meaning that some companies may do particularly well and others poorly and so you see more diffraction and the same is true in of course our market. Secondly you pointed out that there are two pathways which is yes, get people to sign up more with you. The challenge to that is if you go too long you tend to be able to sign them up but not necessarily get as much run rate growth over the period of time as desired or as reflective of the strength of the technology. Lastly on holding the three year, we’ve been holding the three year remarkably well and partially it’s just another element of the stability of our business model and I think it’s just pretty well the gestalt of the semiconductor industry.

Your next question comes from the line of Terence Whalen - Citigroup Terence Whalen – Citigroup: I believe you said you had a 10% customer, I was wondering if you could give more specific number on what that customer was this quarter?

We never disclose specifically what the customers are, most people that have followed us for a number of years and who understand that there’s some semiconductor guys that are very large have figured out that we will on an ongoing basis have essentially a 10% customer. Because the revenue is recognized on a ratable fashion, it’s actually not a this quarter type of question, it’s a deal that we did last year that will last for a number of years. You will see it reoccurring pretty much every quarter. Terence Whalen – Citigroup: With regard to the cash flow number can you remind us what the target was last quarter and then update on specifically what has changed?

The target that we had in our last quarter that we would to achieve approximately $325 million of operating cash flow in the year. The current perspective is that number would range between $300 million and $325 million and even when we look at our free cash flow number working to try to improve that as well, it brings into a range of about $260 million to $285 million on a free cash flow basis inclusive of the CapEx spending which we’ve taken down pretty significantly year-over-year. From the reason that its in that $300 million to $325 million range is just that we’re at the end of our fourth quarter, getting into our fourth quarter and approaching year end and we’ve been able to refine the exact cash flow anticipated by account and look at our payment outflows that are scheduled to happen and just giving ourselves a little bit of a range using that $300 million to $325 million so that we hit it. Terence Whalen – Citigroup: I think you mentioned in your prepared remarks that the sales cycle was lengthening, and you’ve alluded toward incremental cautioning on the part of customers, can you give us more specificity, is this just general customer reservation or is it related to customers that might be restructuring parts of their business or could you give us a little more color on why the sales cycle is lengthening?

I don’t want to overstate it because sales cycles lengthening sounds like a big deal, its almost more like in sales situations that are heading towards closure you suddenly get two, three, four weeks more signature loops then anything else. And that says one thing, that says typically that the approval is going up one or two levels in a company or that everything goes through the desk of the CFO. Secondly when you said does it apply to companies that are restructuring, it feels to me almost like the entire semiconductor is constantly restructuring a little bit, not with the [inaudible] normally associated with that word, but rather with the objective of trying to line up businesses that are a little bit more critical mass in the sub market segments. It interesting just this morning to hear the announcement Erickson and [SD] are teaming up in the mobile domain and this is a mere three months later after [SD and NXP] teamed up and now taking over that piece. And so those are good examples of changes that then bring about the, well how do you do the deals? How do you transition the contracts, etc. and it is more, turbulence is probably the best word rather then really a sales cycle lengthening. Maybe I used words that were a little bit too heavy for the situation. Terence Whalen – Citigroup: Regarding buyback, zero buyback this quarter, after having had some consistent buyback in the prior quarters what caused that in your term and how you think about that and also longer term obviously with the cash balance you have and targets really in the space being slightly smaller how do you think about cash longer term to perhaps enhance the return on equity?

On our cash flows we mentioned this quarter we didn’t buy any stock back but we have been very aggressive throughout 2008, we’ve purchased 7.2 million shares for $170 million which is more then the 5.7 million we bought for all of FY07. and then in addition considering uses of cash we paid $181 million out of the cash at Synplicity to acquire that company in the third quarter so that was a significant investment and again we keep all of those options open whether we’re going to be using our internal operations to invest that cash or whether we’re looking at buybacks or M&A, we just continue to look at that and we still have $260 million remaining on the current authorization so again we’re doing all we can in this area to improve our shareholder value and look at the right investment for the highest return. Terence Whalen – Citigroup: And then longer term perhaps the cash balance especially if you’re looking at deceleration would you think more about trying to enhance increases in return on equity?

Absolutely, always focus on improving our return on equity, through both earnings per share improvement translating through operating margin and revenue growth, all which we have again addressed for 2009 and looking at the performance for 2008 as far as improving shareholder and enhancing return on equity again a very heavy investment in stock buybacks comparison to year-over-year. We continue to look at buybacks as an important area but as you can tell we just did our largest acquisition in several years with the acquisition of Synplicity so longer term really don’t forecast a change. Just what are the right options, we continue to be a very significant cash generator with our business and we’re going to look for the right returns for us that are going to enhance that shareholder value. Terence Whalen – Citigroup: You did mention the large acquisition of Synplicity, it seems like that’s been integrated fairly well here, what is your appetite for other larger acquisitions in the space obviously given the high profile activities of the past quarter with competitors?

This is another one of those where in principle we never comment about any potential M&A. Let me add to Synplicity, I think this was a very good acquisition because it’s a combination of what is a very strong team, a slice of its business is in a very adjacent market to where we were, the [inaudible] market which I think holds promise from another perspective which is they are very rapidly moving to the advanced technology nodes, more rapidly then some of the mainstream ASICs therefore there’s more opportunity there. And of course there’s also a slice that is attached to the rapid prototyping that fits in extremely well in our overall systems strategy. So so far this is turning out to be a very good move and integrations don’t take just three months, it takes longer then that but if the first three months go particularly well, that is a very good indicator for the future. Having said that, it is very good to have cash in a time where there’s a lot of turbulence and obviously we will be looking at opportunities as they show up and of course Synopsys is an opportunity as well.

Your final question comes from the line of Mahesh Sanganeria – RBC Capital Markets Mahesh Sanganeria – RBC Capital Markets: When you talk about the increased caution in your outlook for 2009 how should we, that caution between probably smaller size products which you expect from your customers versus possibly some of your customers pushing out their purchase of your more advanced tools?

I don’t think that they are going to push out advanced tools at all because the very way to do well and to survive is to execute well on your advanced projects where most of the money is made, most of the profitability is there and granted also most of the risk is there and so in that context I expect that if our caution is warranted, that customers are going to be more selective in who they work with, in trying to have closer relationships with those providers, because aside of the software, they are the human capital that we put to bear on making chips successful is actually quite significant. And it’s not a surprise to me that a number of the people that have become our partners and for which we are primary vendors have actually had significant success with some of their advanced chips because of the close collaboration. So it’s coming mostly from that angle. At the same time we clearly watch the turbulence in our markets and therefore we want to set expectations that we think we can live up to well and given the strength that we have we’re going to race forward. Mahesh Sanganeria – RBC Capital Markets: If I understand you correctly when you look out into next year and if you look at your customers outside the leading edge customers, are you finding the pace of transition of the [inaudible] nodes is going according to what you anticipated three to six months back?

Let me debunk a few things, I think one needs to look at two categories. One is the category of people that differentiate themselves because they put more functionality on chips, they drive the state of the art and so on and I would say fundamentally there’s no change there. At times I have given you the design starts for the more advanced nodes. If you look at 45nm that went up again this quarter from last quarter, 159 active designs to now 186 and the number of tape outs is moving up as well. We also already see now an increasingly rapid uptake at 32nm and some other advanced nodes that I can’t really comment about. So on the advanced side, this thing is still moving very, very rapidly and those are the people that actually drive the bulk of the spending in EDA. In the more mainstream or fast follower/mainstream, there what we see is an interesting phenomenon which is that some of the older nodes are hanging around a little longer which does not mean that this is not advanced design because a number of customers take some of the older nodes, let’s say a 130nm and just squeezing much harder to try to get the maximum functionality mostly driven by cost and so if they can do that with a cheaper technology, good for them, but it can be quite demanding there as well. Interestingly enough we see IC Compiler for example being used in both situations to people that really want to do one more pass on their 130nm chip as well as the people that are really driving a 32nm chip. So I think more [inaudible] in that sense is alive and well and we are part of keeping it alive. Mahesh Sanganeria – RBC Capital Markets: Can you talk about your custom design platform?

We started with some hints about three quarters or four quarters ago that we had such projects in the works. We said at that time that end of our last calendar year we would go into Beta, we did that. Betas have progressed well, the product has become more and more solid and as a matter of fact it compares well in robustness to some of the new offerings from the competition and at that time we said we would introduce it during the year. We were purposely a little vague, was it the fiscal year or the calendar year? We are sharper now; it will be during the fiscal year which means we will introduce it this quarter. We haven’t introduced it so we can’t say too much. It should be clear that our objective is not to do a carbon copy of what others have, but rather learn from what has been an evolution of 25, 30 years in analog mixed signal design. Make sure that we have a strong basis upon which we can build for the future but also deal with some of the issues that some of the existing tools have had for a long period of time so that customer is immediately see some pointed benefits and so far it appears that we are well on track with that effort.

I will now turn it back to management for any closing remarks.

We appreciate your time and your support over the last quarter. You have obviously seen a very interesting and somewhat moving set of changes in our industry. At the same time its very clear that Synopsys is a pillar of solidity I hope and that we are clearly building on that and are looking forward with quite a bit of confidence.