Altera (ALTR)

We will continue to make significant investments in the development of new products and focus our efforts on the development of new programmable logic
devices that utilize advanced semiconductor wafer fabrication processes, as well as related development software. We are currently investing in the development of future silicon products, as well as our Quartus II software, our library of IP cores,
and other future products.

Research and development expense decreased $4.1 million in 2008 compared to 2007. This
decrease was attributable to lower spending in 2008 on new product development masks of $21.4 million due mainly to the product launch of the

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Stratix III and Cyclone III device families in 2007. The decrease in spending on development masks was partially offset by an increase in compensation and
benefits of $11.9 million due to variable compensation expense associated with 2008 operating results and an increase in stock-based compensation expense of $2.5 million.

FACE="Times New Roman" SIZE="2">Research and development expense increased $15.7 million in 2007 compared to 2006 primarily due to increased labor costs and increased spending on development masks and prototype wafers, partially offset by a
decrease in stock-based compensation expense. Spending on development masks and prototype wafers increased by $14.4 million in 2007 due to new product launches. Stock-based compensation expense decreased by $8.2 million to $20.4 million in 2007
compared to 2006. During the fourth quarter of 2007, we recorded a $1.7 million restructuring charge, of which $1.0 million was related to employee severance costs.

FACE="Times New Roman" SIZE="2">SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE

Selling, general, and administrative expense
primarily includes labor and benefit expenses related to sales, marketing, and administrative personnel, stock-based compensation for those personnel, commissions and incentives, depreciation, legal, advertising, facilities, and travel expenses.

Selling, general, and administrative expense decreased by $16.7 million in 2008 compared to
2007. The decrease was attributable to our continued efforts to increase efficiency and reduce cost in legal and consulting services, stock-based compensation, compensation and benefits, and other areas. Consulting costs decreased by $6.3 million
due primarily to the absence in 2008 of costs incurred in 2007 related to implementation of our enterprise resource planning system. Stock-based compensation decreased by $4.2 million in 2008 compared to 2007. Compensation and benefits expenses
decreased by $2.0 million in 2008 compared to 2007. The decrease in compensation and benefits is the net result of a decrease of $9.4 million, resulting from our cost-reduction efforts described above, substantially offset by an increase of $7.4
million in variable compensation expense associated with 2008 operating results. The absence in 2008 of $3.5 million of restructuring charges recognized in 2007 (discussed below) was substantially offset by a $2.6 million increase in non-recurring
charges related to the elimination of certain external sales representatives and employee termination costs.

Selling, general, and
administrative expense decreased by $32.5 million in 2007 compared to 2006. The decrease was primarily due to efforts to increase efficiency and reduce cost in legal and consulting services, commissions and incentives and lower stock-based
compensation, partially offset by an increase in labor costs. Legal and consulting costs decreased by $12.3 million in 2007 due primarily to the absence of costs related to the stock option investigation carried out in 2006. Benefit costs declined
by $4.7 million in 2007 as a result of lower incentives and annual bonuses. Stock-based compensation expense decreased by $9.2 million to $28.5 million in 2007 compared to 2006. During the fourth quarter of 2007, we recorded a $3.5 million
restructuring charge, of which $2.6 million was related to employee severance costs.