Altera Reports Third Quarter 1997 Results

Third Quarter Sales Increase 39% Annually, Net Income Up 61% Annually

San Jose, Calif., October 15, 1997 - Altera Corporation (Nasdaq: ALTR) today reported that third quarter sales of $162.1 million were up 39% over the same period last year, and down 1% from the previous quarter.

Gross margin as a percentage of sales for the third quarter was 62.5%, up 1.1 percentage points over the same period last year and down 0.2 percentage points from the prior quarter. On a yearly basis, gross margin increased as a result of lower wafer prices and manufacturing process advancements. As compared to the prior quarter, gross margin declined due to price reductions which became effective July 1, 1997.

Net income for the third quarter was $38.8 million, up 61% over the third quarter of 1996 and down 2% from the previous quarter. Third quarter earnings per share, on a fully-diluted basis, were $0.40, an increase of $0.14 from the same period last year and flat from the prior quarter.

Altera added $37.4 million of cash to its balance sheet during the quarter, after expenditures of $8.3 million toward the construction of the new San Jose headquarters facility, and $14.3 million for routine capital expenditures.

Rodney Smith, President & CEO stated, "The financial results for the September quarter are consistent with the guidance announced on August 27, 1997. Domestic revenues declined sequentially, as expected. However, International revenues increased, and that is encouraging in light of the seasonal slowness which typically accompanies the summer quarter. The communications market segment continued to provide the largest component of our results, followed by the computing segment."

Mr. Smith concluded, "Revenues for new products were up from the prior quarter in spite of the price reductions and slow season. Furthermore, units for new products grew 52% sequentially and set a record at 1 million units purchased by customers."

Additionally, the Company announced that it will change its revenue recognition policy. The Company will defer revenue on shipments to distributors until the product is sold to the end customer, worldwide. This accounting change will involve a restatement of the current year's results consisting of two elements. The first element, a one-time charge of $15 to $20 million, representing the cumulative impact of the change in accounting principle as of January 1, 1997, will be included in Quarter 1, 1997 results. The second element will be a restatement of 1997 results to the new accounting basis, and this will slightly increase first half revenues and earnings (before the one-time charge). The impact to the third quarter results, as just reported, will not be material. The restated results will be disclosed along with the fourth quarter earnings release.

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. More information can be obtained on the world wide web at http://www.altera.com.

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.

EDITOR CONTACT:
Thomas J. Nicoletti, Vice President, Investor Relations
Altera Corporation
San Jose, CA
(408-544-7707)