Altera Announces 2005 Results; Sales Up 11%

SAN JOSE, Calif.-- Jan. 25, 2006--Altera Corporation (Nasdaq:ALTR) today announced 2005 sales of $1.12 billion, up 11%, compared with $1.02 billion in 2004. New product sales increased 73%. Net income for 2005 was $278.8 million, $0.74 per diluted share, versus net income of $275.1 million, $0.72 per diluted share, in 2004.

Fourth quarter sales were $281.9 million, up 18% from the fourth quarter of 2004 and down 3% from the third quarter of 2005. The company's prior guidance was for fourth quarter sales to be in the range of $286 to $297 million. Fourth quarter net income was $69.7 million, $0.19 per diluted share, up 20%, compared with net income of $58.0 million, $0.15 per diluted share, in the fourth quarter of 2004. Gross profit margin was 66.7% for the fourth quarter of 2005 versus 69.8% for the fourth quarter of 2004.

Altera repurchased 19.9 million shares of its common stock during 2005 at a cost of $369.9 million, with 11.0 million shares repurchased during the fourth quarter at a cost of $194.8 million. Altera ended the quarter with $1.3 billion in cash and investments.

"We were the fastest growing major programmable logic company in 2005, as our Stratix(R) and Cyclone(TM) series FPGAs drove market share gains," said John Daane, president, chief executive officer, and chairman of the board. "During the year we completed the rollout of the Cyclone II and MAX(R) II families and announced our third generation HardCopy(R) II structured ASICs and Stratix II GX transceiver-based FPGAs. Our product delivery performance was excellent and our lead times remained short. Customer-focused innovation, quality, and reliability made the year a success, and equip Altera for growth and solid performance in 2006."

Several recent accomplishments mark the company's continuing progress.

• For the first time, Altera was named to the Forbes Platinum 400, the magazine's exclusive list of America's Best Big Companies, selected from corporations with sales above $1 billion. Companies are evaluated compared to their industry peers on a variety of financial and performance measures: sales and earnings growth, stock market returns, debt to total capital, consensus long-term earnings growth forecast, as well as the quality of a company's accounting and governance, financial condition, and earnings. During five of the past six years, the Forbes Platinum 400 outperformed both the S&P 500 and the Dow Jones Industrial Average.


• Altera introduced version 5.1 of its Quartus(R) II design software. The latest Quartus II release completes the rollout of two key tools for increasing designer productivity -- the PowerPlay technology suite and Quartus II incremental compilation. Quartus II software supports all Altera devices, including the recently announced Stratix II GX family. In combination with a broad portfolio of design-ready intellectual property cores, Quartus II software gives designers unparalleled levels of performance and ease of use while reducing time to market and total cost of ownership. In this latest edition, the Quartus II PowerPlay power optimization feature delivers an average of 20% and up to a 60% reduction in dynamic power consumption in Stratix II devices. The incremental compilation capabilities added to this release permit engineers to independently optimize functions and then easily aggregate them into a completed design. When combined with other unique Altera productivity tools, these enhancements offer customers faster design completion and lower cost of ownership.


• Altera's low-cost, production-oriented solutions are driving greater penetration in the consumer market segment. Lower-density Cyclone series devices plus the combination of the high-density Stratix FPGAs and HardCopy series structured ASICs are increasingly accepted in this fast-moving market. Typical of the growing appeal of Altera programmable solutions is the use of Stratix devices in Sanyo's projection TVs and its home entertainment LCD projector PLV-Z4. Using a Stratix FPGA hosting a Nios(R) II processor, Sanyo developed advanced image processing and enhancement functions that provided low-cost product differentiation not possible with ASSPs, costly ASICs, or traditional processors. Sanyo demonstrated these products at this year's Consumer Electronics Show, after winning ProjectorReviews.com's Hot Product Award and HiVi magazine's 2005 Best Buy Award.

Business Outlook for the First Quarter 2006

Altera expects that first quarter sales will increase 4% to 7% sequentially. Gross margin will be in the range of 65.5% to 67.5%. With the company's adoption of SFAS123R, first quarter operating expenses will include approximately $20 million of share-based compensation charges. Including those charges, operating expenses are expected to be approximately $138 million. Inclusion of stock-based compensation charges in operating expense adds significantly to the volatility of actual versus expected expense due to volatility in our stock price, which we cannot predict. Other income will be approximately $10 million. The company anticipates that its first quarter and full year tax rate will be in the range of 14% to 16%, including 200-300 basis points of benefit due to the inclusion of stock-based compensation expense in the income statement.

Note: The outlook above assumes the impact from the operation of the company's non-qualified deferred compensation plan will be nil.

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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. All other product or service names are the property of their respective holder.