MICHAEL D. TORPEY (State Bar No. 79424)
STEVEN S. KAUFHOLD (State Bar No. 157195)
BROBECK, PHLEGER & HARRISON LLP
Spear Street Tower, One Market
San Francisco, CA 94105
Telephone: (415) 442-0900

Attorneys for Cadence Design Systems, Inc.,
Donald L. Lucas, John R. Harding, H. Raymond
Bingham, John F. Olsen, Shane V. Robison, and
Kenton C. Murphy

Cadence Design Systems, Inc., Donald L. Lucas, John R. Harding, H. Raymond Bingham, John F. Olsen, Shane V. Robison, and Kenton C. Murphy (collectively, "Cadence") file this Response to plaintiff's Motion For Appointment of Lead Plaintiff. As set forth below, Cadence has no opposition to appointment of plaintiff Edward Spett as lead plaintiff in this action. Nor does Cadence oppose the appointment of plaintiff's counsel as lead counsel in this action. However, in addition to seeking appointment as lead counsel, plaintiff's present motion repeats the allegations of securities fraud and corporate wrongdoing included in plaintiff's Complaint. For this reason, Cadence responds briefly to place plaintiff's allegations in context.

I. PLAINTIFF HAS NOT AND WILL NOT BE ABLE TO STATE A CLAIM FOR SECURITIES FRAUD AGAINST CADENCE

Cadence is a leading provider of software and services which assist in electronic design. Cadence's market, both for products and consulting, is subject to rapid technological developments, evolving industry standards, changes in customer requirements and frequent new product introductions and enhancements. Cadence competes with a number of companies, including Avant! Corporation, Mentor Graphics Corporation and Synopsys, Inc. Since the mid-1990s, Cadence has grown in size and profitability.

On April 20, 1999, Cadence announced its financial results for the first quarter of 1999. See Complaint at ¶60. Cadence's financial results met Wall Street analysts' expectations. In its press release issued that date, Cadence also stated: "revenue and earnings growth are anticipated to be slower for the remainder of 1999, and that growth rate for service revenues will be constrained by the company's emphasis on accepting higher margin engagements." Id. Plaintiff's own complaint states: "Cadence warned yesterday that sales and earnings will increase at a slower pace this year." Id. at ¶61 (citing a report from Bloomberg dated April 21, 1999). On April 21, 1999, the day following issuance of the Cadence press release, Cadence stock decreased in value from $20 13/16 to $12.50. Id. at ¶63.

On April 30, 1999, plaintiff Spett seized on this decrease in stock price and the company press release to file this putative securities class action alleging that Cadence, it's entire senior management team and a member of the board of directors committed securities fraud. Plaintiff's complaint specifically attributes the decrease in stock price to the "disclosures" in the press release that Cadence anticipated slower growth in 1999. Complaint at ¶63.

Thus, plaintiff attempts to state a cause of action for securities fraud based on forward-looking statements from Cadence's then-CEO, Jack Harding. The allegations fall short for a host of reasons. These forward-looking statements would not have stated a claim before passage of the Private Securities Litigation Reform Act of 1995 ("PSLRA") since they are each simply non-actionable statements of general corporate optimism and also are subject to dismissal under the "bespeaks caution" doctrine. See Worlds of Wonder Securities Litigation, 35 F.3d 1407, 1414 (9th Cir. 1994), cert. denied sub nom. 116 S. Ct. 185 (1995). Also, such forward-looking statements fall within the statutory "safe harbor" created by the PSLRA. The PSLRA makes it clear that a person covered by the safe harbor provision may not be held liable for any forward-looking statement unless the plaintiff proves that the statement was made with actual knowledge that it was false or misleading. 15 U.S.C. § 78u-5. Thus, at this stage, plaintiff must plead with particularity "facts giving rise to a strong inference" that Cadence acted with "actual knowledge" in making such statements. See 15 U.S.C. § 78u-5; Section 21D(b)(2). Plaintiff does not even come close to meeting these mandatory pleading requirements.

As the Ninth Circuit recently held, "Congress enacted the PSLRA to deter opportunistic private plaintiffs from filing abusive securities fraud claims, in part, by raising the pleading standards for private securities fraud plaintiffs." In re Silicon Graphics Securities Litigation, ___ F.3d ___, 1999 U.S. App. LEXIS 14955 at **1-2. Since the Complaint does not meet the heightened pleading standards of the PSLRA, and since plaintiff will not be able to successfully amend his complaint to properly state a claim for securities fraud, Cadence reserves its right to file a motion to dismiss the Complaint. The parties have agreed that such a motion may be filed on or before September 20, 1999.

II. CADENCE HAS NO OPPOSITION TO THE APPOINTMENT OF EDWARD SPETT AS LEAD PLAINTIFF NOR TO THE APPOINTMENT OF HIS SELECTION OF LEAD COUNSEL

The PSLRA provides statutory guidance for courts in evaluating the appointment of the lead plaintiff and lead counsel in the common situation where numerous putative class actions are filed against a company that suffers an unexpected decrease in stock price¹. As set forth above, Cadence has no opposition to plaintiff's motion for appointment as lead counsel.

III. PLAINTIFF MUST STILL MEET HIS RULE 23 OBLIGATIONS

Appointment as lead plaintiff by the Court does not relieve plaintiff Spett of his obligations under Rule 23. Cadence's non-opposition to such appointment is not intended to waive plaintiff's compliance with Rule 23 and Cadence expressly reserves all rights under both the PSLRA and Rule 23.

¹ It is telling that no other plaintiff has filed a lawsuit against Cadence based on the forward-looking statements cited by plaintiff Spett. Since no other potential lead plaintiffs or lead counsel have shown interest in appointment, the Court need not select among competing applicants for appointment here.

I, Soraya Escobar, declare:

I am and was at the time of the service mentioned in this declaration, employed in the County of San Francisco, California. I am over the age of 18 years and not a party to this cause. My business address is Brobeck, Phleger & Harrison LLP, Spear Street Tower, One Market, San Francisco, California 94105.

On August 6, 1999, I served a copy(ies) of the following document(s):

RESPONSE TO PLAINTIFF SPETT'S MOTION TO BE APPOINTED LEAD PLAINTIFF AND FOR APPROVAL OF LEAD PLAINTIFF'S SELECTION OF LEAD COUNSEL

by placing them in a sealed envelope(s) addressed as follows:

I placed the sealed envelope(s) for collection and mailing by following the ordinary business practices of Brobeck, Phleger & Harrison LLP, , California. I am readily familiar with Brobeck, Phleger & Harrison LLP's practice for collecting and processing of correspondence for mailing with the United States Postal Service, said practice being that, in the ordinary course of business, correspondence (with postage fully prepaid) is deposited with the United States Postal Service the same day as it is placed for collection.

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct, and that this declaration was executed on August 6, 1999, at San Francisco, California.

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