Mentor Graphics Issues Open Letter to Shareholders

WILSONVILLE, Ore. — (BUSINESS WIRE) — May 5, 2011 — Mentor Graphics Corp. (NASDAQ: MENT) today issued the following open letter to the shareholders of Mentor Graphics regarding the company’s Annual Meeting of Shareholders scheduled for May 12, 2011.

The Mentor Graphics Board strongly recommends that Mentor Graphics shareholders vote FOR the company’s director nominees on the WHITE proxy card by telephone or internet and discard any proxy materials received from Carl Icahn.

BECAUSE TIME IS SHORT, THE COMPANY ENCOURAGES ALL SHAREHOLDERS TO VOTE THE WHITE PROXY CARD BY TELEPHONE OR INTERNET

May 5, 2011

Dear Fellow Mentor Graphics Shareholders:

At next week’s Annual Meeting of Shareholders, you will have the opportunity to vote on your Board of Directors’ record of value creation. We urge you to support the Board and management team that has delivered excellent results and created value for Mentor Graphics’ shareholders.

The current Board and management team have combined strategic vision with disciplined financial execution, which has made your company the fastest growing of the ‘Big 3’ EDA companies.

MENTOR GRAPHICS CONTINUES TO DELIVER EXCELLENT RESULTS

AND CREATE SHAREHOLDER VALUE

In fiscal year 2011, the company:

  • Delivered record revenues of $915 million, a 14% increase from the preceding fiscal year;
  • Achieved non-GAAP earnings per share of $0.70, a 49% increase from the preceding fiscal year; and
  • Reported GAAP earnings per share of $0.26, up from a loss of $0.23 per share the prior fiscal year.

THE FIRST QUARTER OF FISCAL 2012 WAS EVEN STRONGER

Mentor Graphics’ momentum from the last fiscal year accelerated in the first quarter with strong financial results. In the first quarter of fiscal year 2012, the company:

  • Expects results to exceed prior guidance with revenues of about $230 million, up over 25% from the prior fiscal first quarter;
  • Exceeded guidance in eight of the last nine quarters, and met guidance in the remaining quarter;
  • Expects non-GAAP earnings in the range of $0.18 to $0.20 per share and a GAAP loss in the range of $0.02 to $0.06 per share;
  • Expects to achieve a non-GAAP operating margin of approximately 14%, and a GAAP operating margin of approximately 8%; and
  • Expects to report an approximate 7% year-over-year increase in bookings.

OUR OUTLOOK FOR THE BALANCE OF 2012 REMAINS STRONG

Our outlook for the remainder of fiscal year 2012 is strong, with forecasted revenues of approximately $1 billion, an increase of 9% compared to fiscal year 2011. We are estimating non-GAAP operating margin to be approximately 15% and GAAP operating margin 11%, up from 12% and 6% respectively in fiscal year 2011.

MENTOR GRAPHICS IS COMMITTED TO RETURNING $150 MILLION OF CAPITAL TO SHAREHOLDERS OVER THE NEXT THREE YEARS

We expect to generate significant cash flow through Mentor Graphics’ growth and increasing margins, and intend to use this cash flow to return approximately $150 million of capital to shareholders through stock repurchases or dividends over the next three years.

MENTOR GRAPHICS’ BOARD AND MANAGEMENT HAVE DELIVERED

SHARE PRICE OUTPERFORMANCE

The successful execution of Mentor Graphics’ strategy is reflected in Mentor Graphics’ stock price, which has outperformed its two closest competitors and general market indices, over one, three and five year periods ending April 21, 2011.

    Mentor   Synopsys   Cadence   NASDAQ Composite   Mentor Rank
1 Year   51%   15%   35%   12%   #1
3 Years 58% 21% (9)% 19% #1
5 Years 27% 22% (46)% 21% #1

TWO LEADING PROXY ADVISORY FIRMS SUPPORT THE ELECTION OF ALL MENTOR GRAPHICS’ NOMINEES

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