Altera Reports Second Quarter Fiscal 1996 Results

San Jose, Calif., July 17, 1996 - Altera Corporation (Nasdaq: ALTR) today reported that second quarter sales of $116.3 million were up 26% over the same period last year, but down 15% from the previous quarter.

Gross margin as a percentage of sales for the second quarter was 61.4%, up 2.1 percentage points over the same period last year and 0.1 percentage point over the prior quarter. Gross margin improvements are attributed to improved manufacturing yields which are a result of newer and more advanced processes.

Net income for the second quarter was $24.3 million, up 24% over the second quarter of 1995 but down 23% from the previous quarter. Second quarter earnings per share, on a fully-diluted basis, were $0.52, an increase of $0.09 from the same period last year but down $0.14 from the first quarter of 1996.

Quarterly cash activity included an initial payment of $42.1 million as part of our $140 million investment in Wafertech, a joint venture with TSMC and other partners to manufacture wafers in a state-of-the-art facility in Camas, Washington. Capital expenditures were $9.6 million.

Rodney Smith, President & CEO stated, "Revenues declined in the second quarter due to the build up of inventory at end customers and their subcontract manufacturers. This inventory build up was caused by the tight supply conditions on our mainstream products (MAX 7000, FLEX 8000) as demand grew rapidly in 1995 and Q1 1996. The dramatic improvement in availability of these products recently has driven the decline in end customer demand. We indicated on June 4 that end consumption would decline sequentially in North America, Europe, and Japan. As a result, we expected a drop in revenues of approximately 15% from the prior quarter. Our financial results for this quarter are consistent with this statement. While the present transition to off-the-shelf availability on both mainstream (MAX 7000, FLEX 8000) and new product families (MAX 9000, FLEX 10K) is disruptive in the short-term, it responds to customers' time-to-market requirements and we feel will enhance design wins over the longer term."

Mr. Smith continued, "The FLEX 10K family continues to be well received in the marketplace. Second quarter revenue growth for this product family doubled sequentially and the book-to-bill ratio was positive. The density, price, and speed advantages of this product family are unmatched by any other competitive product shipping in the marketplace today."

Mr. Smith concluded, "Backlog in the June quarter declined to the early 1995 levels. We expect some further reduction in backlog for the September quarter. Shorter lead times have caused the business to be more dependent on turns (turns are orders that are received and shipped in the same quarter). However, we believe that most of the cancellation activity is now behind us and that any future backlog reduction will be modest."

Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation risks of dependence on third-party wafer suppliers, intellectual property rights and litigation, market acceptance of and demand for the Company's products as well as general market conditions, competition and pricing, and development of technology and manufacturing capabilities. Please refer to the Company's Securities and Exchange Commission filings, copies of which are available from the Company without charge, for further information.

Fax on Demand:

Copies of Altera's announcement are available from its fax-on-demand service. In the U.S. and Canada to request a copy call 1-800-789-ALTR. International users can dial their local International Access Code followed by 1-408-894-0466.

Altera Corporation, founded in 1983, is a world-wide leader in high-performance, high-density programmable logic devices and associated computer aided engineering (CAE) logic development tools. Programmable logic devices are semiconductor chips that offer on-site programmability to customers. The chips are programmed with tools that run on personal computers or engineering workstations. User benefits include ease of use, lower risk, and fast time-to-market. The Company offers the broadest line of CMOS programmable logic devices that address high-speed, high density, and lower power applications. Altera products serve a broad range of market areas, including telecommunications, data communications, computers, and industrial applications. Altera common stock is traded on The Nasdaq Stock Market using the symbol ALTR.