Altera Announces Third Quarter Results; Sales up 2% Sequentially; New Products Grow 23%

SAN JOSE, Calif.--Oct. 24, 2005--Altera Corporation (Nasdaq:ALTR) today announced third quarter 2005 sales of $291.5 million, up 2% from the second quarter of 2005 and up 10% from the third quarter of 2004. Sales of the company's new products grew 23% sequentially and were up 66% from the prior year's third quarter.

Third quarter net income was $77.8 million, $0.21 per diluted share, compared to net income of $83.1 million, $0.22 per diluted share, in the third quarter of 2004. Gross profit margin was 66.5% for the third quarter of 2005 versus 69.4% for the third quarter of 2004.

The third quarter tax provision includes a $3.6 million charge related to the future repatriation of an additional $100 million of foreign earnings pursuant to the provisions of the American Jobs Creation Act of 2004. In addition, the company recorded a tax benefit of approximately $2.6 million arising primarily from the settlement of federal and California income tax audits and the filing of U.S. and state 2004 income tax returns during the quarter. The net impact of these three items added $1 million to the company's third quarter tax provision.

Altera repurchased 4.7 million shares of its common stock during the quarter at a cost of $93.8 million. Altera ended the quarter with $1.3 billion in cash and short- and long-term investments.

"Every new product family grew sequentially this quarter, including FPGAs, CPLDs, and HardCopy(R) structured ASICs, creating another quarter of strong new product growth. The Stratix(R) and Stratix GX families collectively grew 40% sequentially and now represent more than 20% of Altera's revenues, demonstrating Altera's continuing leadership across this generation of high-density FPGAs," said John Daane, president, chief executive officer, and chairman of the board. "Among our most recently introduced products, the Cyclone(TM) II family is off to a fast start, extending the lead established with the original Cyclone family in the low-cost FPGA space. At the high end, the Stratix II FPGA family also grew strongly and remains the 90-nm high-density leader."

Altera's innovation and execution made the company the fastest-growing programmable logic supplier in 2004. This track record of innovation and execution continues in 2005:

-- Altera launched the Stratix II GX family, the company's third generation of FPGAs with embedded serial transceivers. Stratix II GX FPGAs address the growing demand for high-speed serial data transmission. Stratix II GX transceivers can accommodate a wide range of protocol standards and multiple data rates while delivering best-in-class signal integrity. System engineers may now begin their Stratix II GX device designs using Altera's Quartus(R) II version 5.1 software. Initial devices will ship in early 2006. The 90-nm-based Stratix II GX devices use the same innovative logic structure as the Stratix II family, the industry's fastest 90-nm FPGAs. Stratix II GX transceivers operate at up to 6.375 Gbps, targeting the data rates required by today's leading designers, while consuming less than half the power of competing alternatives. Altera offers a comprehensive system solution that includes intellectual property, system models, reference designs, and signal integrity tools. As the usage of serial transceivers continues to expand, Stratix II GX FPGAs offer a highly efficient, low-risk development path for high-speed designs across the markets served by Altera.

-- Continuing Altera's record of consistent product delivery, all members of Altera's Cyclone II FPGA family are now available as production-qualified devices. This milestone was reached only seven months after the family began shipping, demonstrating to customers that they can rely on Altera as they take their Cyclone II-based designs into production. These second-generation Cyclone devices are based on an architecture optimized for a 90-nm, low-k process and provide more than three times the logic capacity of the first-generation, industry-leading Cyclone family. Cyclone II FPGAs deliver on average 60% faster performance and half the power consumption of competing low-cost FPGAs. Cyclone II devices are supported by the free Quartus II Web Edition software, which is the industry's most advanced design software for FPGAs. With cost to the customer 30% lower than the prior generation, Cyclone II devices can support complex digital system designs at a price that rivals that of ASICs. These capabilities mean that the Cyclone II family is well suited for volume applications such as video displays, digital set top boxes, DSL modems, medical imaging, and mid-range and low-end routers.

Business Outlook

Altera expects sales in the fourth quarter to be unchanged compared to the third quarter, plus or minus 2%. Gross margins are likely to be in the range of 66%. The company further anticipates that R&D spending will approximate $53 million and that SG&A expenses will approximate $58 million. Other income will approximate $9 million. The expected tax rate is 20%.

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Conference Call and Quarterly Update

A conference call will be held today at 1:45 p.m. Pacific Time to discuss the quarter's results and the fourth quarter 2005 outlook. The web cast and subsequent replay will be available in the investor relations section of the company's web site at http://www.altera.com. A telephonic replay of the call may be accessed later in the day by calling (719) 457-0820 and referencing confirmation code 258712. The telephonic replay will be available for two weeks following the live call.

Altera's fourth quarter business update will be issued in a press release available after the market close on December 5.

About Altera

Altera Corporation (Nasdaq:ALTR) is the world's pioneer of system-on-a-programmable-chip (SOPC) solutions. Combining programmable logic technology with software tools, intellectual property, and technical services, Altera provides high-value programmable solutions to approximately 14,000 customers worldwide. More information is available at http://www.altera.com.

Altera, The Programmable Solutions Company, the stylized Altera logo, specific device designations and all other words that are identified as trademarks and/or service marks are, unless noted otherwise, the trademarks and service marks of Altera Corporation in the U.S. and other countries.