<PAGE>

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

--------------------------------------------------------------------------------
  X    Quarterly report pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934 for the quarterly period ended March 31, 1999 or
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
       Transition report pursuant to Section 13 or 15(d) of the Securities 
       Exchange Act of 1934 for the transition period from _________  to________
--------------------------------------------------------------------------------

Commission file number:  000-20923

                               SUMMIT DESIGN, INC.
             (Exact name of registrant as specified in its charter)

                     DELAWARE                               93-1137888
 (State or other jurisdiction of incorporation or       (I.R.S. Employer 
                     organization)                    Identification Number)

                            9305 S. W. GEMINI DRIVE,
                             BEAVERTON, OREGON 97008
                     (Address of principal executive office)
       Registrant's Telephone number, including area code: (503) 643-9281

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X   No
                                       ---     ---

As of May 12, 1999, the Registrant had outstanding 15,682,124 shares of Common
Stock.


<PAGE>



                               SUMMIT DESIGN, INC.

                                      INDEX
<TABLE>
<CAPTION>

<S>      <C>                                                                    <C>
PART I   FINANCIAL INFORMATION

Item 1   Condensed Consolidated Financial Statements

         Condensed Consolidated Balance Sheets as of March 31, 1999
         (unaudited) and December 31, 1998.                                     3

         Condensed Consolidated Statements of Operations for the
         three months ended March 31, 1999 and 1998 (unaudited).                4

         Condensed Consolidated Statements of Cash Flows for
         the three months ended March 31, 1999 and 1998 (unaudited).            5

         Notes to Condensed Consolidated Financial Statements.                  6

Item 2   Management's Discussion and Analysis of Financial
           Condition and Results of Operations                                  9

PART II     OTHER INFORMATION

Item 6   Exhibits and Reports on Form 8-K                                      27

Items 1, 2,3, 4 and 5      Not Applicable                                      27

Signature                                                                      28

Exhibit Index                                                                  29
</TABLE>


                                      -2-

<PAGE>

                               SUMMIT DESIGN, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                             March 31, 1999              December 31, 1998
                                                          --------------------           -----------------
                                                               (Unaudited)
<S>                                                       <C>                            <C>
                     ASSETS
Current assets:
   Cash and cash equivalents....................                       $23,676                  $27,693
   Accounts receivable, net.....................                        8 ,719                    8,852
   Prepaid expenses and other...................                           547                      862
   Deferred income taxes........................                           792                      792
                                                          --------------------           ----------------
     Total current assets.......................                        33,734                   38,199

Furniture and equipment, net....................                         4,132                    4,113
Intangibles, net................................                         2,195                    2,870
Goodwill, net...................................                         2,554                    2,742
Deposits and other assets.......................                         2,786                    2,286
                                                          ====================           ==============
        Total assets............................                       $45,401                  $50,210
                                                          ====================           ==============

                  LIABILITIES
Current liabilities:
   Long-term debt, current portion..............                        $  109                    $  54
   Capital lease obligation, current portion....                            32                       43
   Accounts payable.............................                         1,552                    2,520
   Accrued liabilities..........................                         4,304                    5,687
   Deferred revenue.............................                         5,459                    5,640
                                                          --------------------           --------------
     Total current liabilities..................                        11,456                   13,944

Long-term debt, less current portion............                             -                      156
Deferred revenue, less current portion..........                           131                      146
Deferred income taxes...........................                           489                      489
                                                          --------------------           --------------
     Total liabilities..........................                        12,076                   14,735
                                                          --------------------           --------------

Commitments and contingencies

              STOCKHOLDERS' EQUITY
Common stock, $.01 par value. Authorized
30,000 shares; issued and outstanding 15,598
shares at March 31, 1999 and 15,457 shares at
December 31, 1998. .............................                           156                      155
Additional paid-in capital......................                        44,122                   44,039
Accumulated deficit.............................                      (10,953)                  (8,719)
                                                          --------------------           --------------
     Total stockholders' equity.................                        33,325                   35,475
                                                          --------------------           --------------
       Total liabilities and stockholders'
equity.                                                                $45,401                  $50,210
                                                          ====================           ==============
</TABLE>



          The accompanying notes are an integral part of the condensed 
                       consolidated financial statements


                                      -3-

<PAGE>

                               SUMMIT DESIGN, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   Three Months Ended
                                                                        March 31,
                                                                 -----------------------
                                                                    1999         1998
                                                                 ------------- ------------
<S>                                                              <C>           <C>
Revenue:
   Product licenses.................................                 $4,056       $8,201
   Maintenance and services.........................                  2,760        2,064
   Other............................................                      -           92
                                                                 ------------- ------------
     Total revenue..................................                  6,816       10,357

Cost of revenue:
   Product licenses.................................                    132          193
   Maintenance and services.........................                    257          225
   Amortization of purchased technologies...........                    165          165
                                                                 ------------- ------------
     Total cost of revenue..........................                    554          583
                                                                 ------------- ------------
        Gross profit................................                  6,262        9,774
                                                                 ------------- ------------

Operating expenses:

   Research and development.........................                  2,676        2,929
   Sales and marketing..............................                  2,908        3,048
   General and administrative.......................                  1,167        1,062
   Amortization of goodwill and other intangibles...                    698          698
   Non-recurring charges............................                  1,340            -
                                                                 ------------- ------------
     Total operating expenses.......................                  8,789        7,737
                                                                 ------------- ------------

Income (loss) from operations.......................                (2,527)        2,037

Interest expense....................................                    (1)          (1)
Other income, net...................................                    294          289
                                                                 ------------- ------------
Income (loss) before income taxes...................                (2,234)        2,325
Income tax provision................................                      -          923
                                                                 ------------- ------------
Net income (loss) ..................................               $(2,234)     $ 1,402
                                                                 ============= ============

Earnings (loss) per share:
      Basic.........................................               $ (0.14)       $ 0.09
                                                                 ============= ============

      Diluted  .....................................               $ (0.14)       $ 0.09
                                                                 ------------- ------------

Number of shares used computing 
   earnings (loss) per share:
      Basic.........................................                 15,576       14,910
                                                                 ============= ============

      Diluted  .....................................                 15,576       16,190
                                                                 ============= ============
</TABLE>



          The accompanying notes are an integral part of the condensed 
                       consolidated financial statements


                                      -4-

<PAGE>

                               SUMMIT DESIGN, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         Three Months Ended
                                                                             March 31,
                                                                     -----------------------------
                                                                        1999            1998
                                                                     -------------   -------------
<S>                                                                  <C>             <C>
Cash flows from operating activities:
     Net income (loss)....................................            $ (2,234)          $1,402
     Adjustments to reconcile net income to net cash
        provided by (used in) operating activities:
          Depreciation and amortization...................                1,262           1,117
          Amortization of contingent share liabiltiy......                    -             550
          Deferred taxes..................................                    -            (51)
          Equity in losses of and transactions with
            unconsolidated joint venture..................                   60               -
          Changes in assets and liabilities:
               Accounts receivable........................                  133           (268)
               Prepaid expenses and other.................                  315              95
               Accounts payable...........................                (968)              49
               Accrued liabilities........................              (1,383)           (261)
               Deferred revenue...........................                (196)           (172)
               Other, net.................................                (150)             153
                                                                     -------------   -------------
        Net cash provided by (used in) operating
          activities......................................              (3,161)           2,614
                                                                     -------------   -------------
Cash flows from investing activities:
     Additions to furniture and equipment.................                (418)           (452)
     Notes receivable from related parties, net...........                (410)           (125)
                                                                     -------------   -------------
        Net cash used in investing activities.............                (828)           (577)
                                                                     -------------   -------------
Cash flows from financing activities:

     Issuance of common stock, net of issuance costs......                   84             288
     Tax benefit of option exercises......................                    -             450
     Payments to acquire treasury stock...................                    -         (2,329)
     Principal payments of debt obligations...............                (101)             (2)
     Principal payments of capital lease obligations......                 (11)            (15)
                                                                     -------------   -------------
        Net cash used in financing activities.............                 (28)         (1,608)
                                                                     -------------   -------------
        Increase (decrease) in cash and cash equivalents..              (4,017)             429
Cash and cash equivalents, beginning of period............               27,693          19,973
                                                                     -------------   -------------
Cash and cash equivalents, end of period..................             $ 23,676         $20,402
                                                                     =============   =============
Supplemental disclosure of cash flow information: 
     Cash paid during the period for:
          Interest........................................               $    1            $  1
          Income taxes....................................                1,166             547
</TABLE>



          The accompanying notes are an integral part of the condensed 
                       consolidated financial statements


                                      -5-

<PAGE>

                               SUMMIT DESIGN, INC.
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)


1.   BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared by Summit 
Design, Inc. ("Summit" or "the Company") in accordance with the rules and 
regulations of the Securities and Exchange Commission. Certain information 
and footnote disclosures normally included in financial statements prepared 
in accordance with generally accepted accounting principles have been 
condensed or omitted in accordance with such rules and regulations. In the 
opinion of management, the accompanying unaudited financial statements 
reflect all adjustments, consisting only of normal recurring adjustments, 
necessary to present fairly the financial position of the Company, and its 
results of operations and cash flows. These financial statements should be 
read in conjunction with the audited financial statements and notes thereto 
for the years ended December 31, 1998, 1997 and 1996 included in the 
Company's Form 10-K filed for December 31, 1998.

The results of operations for the three months ended March 31, 1999 are not 
necessarily indicative of the results that may be expected for the year ended 
December 31, 1999 or any other future interim period, and the Company makes 
no representations related thereto.


                                      -6-

<PAGE>

                               SUMMIT DESIGN, INC.
               Notes to Condensed Consolidated Financial Statements
                      (In thousands, except per share data)


2.   BALANCE SHEET COMPONENTS (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    March 31, 1999            December 31, 1998
                                                                ----------------------      ----------------------
                                                                    (Unaudited)
<S>                                                             <C>                         <C>
Accounts receivable:

   Trade receivables...............................                         $ 9,230                     $ 9,363
   Less allowance for doubtful accounts............                           (511)                       (511)
                                                                ----------------------      ----------------------
                                                                            $ 8,719                     $ 8,852
                                                                ======================      ======================
Furniture and equipment:

   Office furniture equipment .....................                         $ 1,324                     $ 1,201
   Computer equipment..............................                           5,320                       5,138
   Leasehold improvements..........................                             604                         491
                                                                ----------------------      ----------------------
                                                                              7,248                       6,830
Less: accumulated depreciation and amortization....                         (3,116)                     (2,717)
                                                                ----------------------      ----------------------
                                                                            $ 4,132                     $ 4,113
                                                                ======================      ======================

Accrued expenses:

   Payroll and related benefits....................                         $ 1,841                     $ 3,051
   Severance.......................................                           1,340                           -
   Sales and marketing.............................                             140                         332
   Accounting and legal............................                             302                         310
   Federal and state income taxes payable..........                             372                       1,549
   Sales taxes payable.............................                              46                         160
   Other  .........................................                             263                         285
                                                                ----------------------      ----------------------
     Total accrued expenses........................                         $ 4,304                     $ 5,687
                                                                ======================      ======================
</TABLE>

                                      -7-

<PAGE>

                               SUMMIT DESIGN, INC.
               Notes to Condensed Consolidated Financial Statements
                      (In thousands, except per share data)


3.   RECONCILIATION OF EARNINGS PER SHARE

On January 1, 1998, the Company adopted Statement of Financial Accounting 
Standards (SFAS) No. 128, "Earnings Per Share." In accordance with SFAS No. 
128, basic earnings per share is computed using the weighted average number 
of common shares outstanding during the period. Diluted earnings per share is 
computed using the weighted average number of common and dilutive common 
equivalent shares outstanding during the period. Dilutive common equivalent 
shares consist of common stock issuable upon exercise of stock options using 
the treasury stock method. The following provides a reconciliation of the 
numerators and denominators of the basic and diluted per share computations:

<TABLE>
<CAPTION>
                                                                        March 31,
                                                           ---------------------------------
                                                                      1999             1998
                                                           ---------------- ----------------
                                                                       (Unaudited)
<S>                                                        <C>              <C>
Numerator:
   Net income (loss)                                             $ (2,234)          $ 1,402
                                                                 =========          =======

Denominator:
   Denominator for basic earnings (loss) per share:
     Weighted average shares                                        15,576           14,910

   Effect of dilutive securities:
     Employee stock options                                              -            1,280
                                                                 ---------          -------

   Denominator for diluted earnings (loss) per share                15,576           16,190
                                                                 =========          =======
Net income (loss) per share - basic                                $(0.14)          $  0.09
                                                                 =========          =======
Net income (loss) per share - diluted                              $(0.14)          $  0.09
                                                                 =========          =======
</TABLE>


                                      -8-

<PAGE>

ITEM 2    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
          AND RESULTS OF OPERATIONS

IMPORTANT NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within 
the meaning of Section 27A of the Securities Act and Section 21E of the 
Exchange Act. Words such as "anticipates," "expects," "intends," "plans," 
"believes," "seeks," "estimates" and similar expressions identify such 
forward-looking statements. These forward-looking statements are subject to 
risks and uncertainties that could cause actual results to differ materially 
from those indicated in the forward-looking statements. Factors which could 
cause actual results to differ materially include those set forth in the 
following discussion, and, in particular, the risks discussed below under the 
subheading "Additional Risk Factors that Could Affect Operating Results and 
Market Price of Stock." Unless required by law, the Company undertakes no 
obligation to update publicly any forward-looking statements.

OVERVIEW

Summit was founded in December 1993 to act as the holding company for Test 
Systems Strategies, Inc. ("TSSI") and SEE Technologies, (now Summit Design 
(EDA) Ltd.) (collectively, the "Reorganization"). TSSI was founded in 1979 to 
develop and market integrated circuit ("IC" or "chip") manufacturing test 
products. In January 1993, TSSI retained a new Chief Executive Officer and 
began to restructure its senior management team. Thereafter, the Company 
broadened its strategy from focusing primarily on manufacturing test products 
to include providing HLDA design creation and verification tools and 
integrating these with its core technology. As part of its strategy, in early 
1994, TSSI acquired SEE Technologies, an Israeli company that, through its 
predecessor, began operations in 1983 and had operated primarily as a 
research and development and consulting company focused on the electronic 
design automation ("EDA") market. As a result of the Reorganization, TSSI and 
SEE Technologies became wholly-owned subsidiaries of Summit in the first 
quarter of 1994.

Prior to the Reorganization, the Company's TDS product and related 
maintenance revenue accounted for all of the Company's revenue. After the 
Reorganization and through June 30, 1997, the Company's revenue was 
predominantly derived from two product lines, Visual HDL, which includes 
Visual HDL for VHDL and Visual HDL for Verilog, and TDS. As a result of the 
July 1997 sale of the TDS product line, Design to Test products are no longer 
a source of revenue for the Company. With the acquisition of TriQuest Design 
Automation, Inc. ("TriQuest") in February 1997, Simulation Technologies Corp 
("SimTech"), in September 1997, and ProSoft OY ("ProSoft") in June 1998, the 
Company has also derived revenue from verification products which include 
hardware-software co-verification, code coverage, and HDL debugging products 
as well as analysis, verification and RTL optimization tools.

Revenue consists primarily of fees for licenses of the Company's software 
products, maintenance and customer training. Product license revenue is 
derived from the sale of software licenses to distributors and end-users. 
Revenue from the sale of software licenses is recognized upon shipment of the 
product if remaining vendor obligations are insignificant and collection of 
the resulting receivable is probable, otherwise revenue from such software 
products is deferred until such time as vendor obligations are met. 
Maintenance revenue is deferred and recognized ratably over the term of the 
maintenance agreement, which is typically 12 months. Revenue from customer 
training is recognized when the service is performed. Revenue earned on 
software arrangements involving multiple elements is allocated to each 
element based on vendor-specific objective evidence (VSOE) of the fair value 
of the various elements within the arrangement. The Company sells its 
products through a direct sales force in North America and selected European 
countries and through distributors in the Company's other international 
markets. Revenue from product sales through distributors is recognized net of 
the associated distributor discounts. Fees received for granting distribution 
rights are deferred and recognized ratably over the term of the distribution 
agreement. Although the Company has not adopted a formal return policy, the 
Company generally reimburses customers in full for returned products. 
Estimated sales returns are recorded when the related revenue is recognized.

The Company's products perform a variety of functions, certain of which are, 
and in the future may be, offered as separate products or discrete point 
solutions by the Company's existing and future competitors. For example, 
certain companies currently offer design entry products without simulators. 
There can be no


                                      -9-

<PAGE>

assurance that such competition will not cause the Company to offer point 
solutions instead of, or in addition to, the Company's current software 
products. Such point solutions would be priced lower than the Company's 
current product offerings and could cause the Company's average selling 
prices to decrease. Accordingly, based on these and other factors, the 
Company expects that average selling prices for its products may continue to 
fluctuate in the future.

Summit entered into a joint venture with Anam, effective April 1, 1996, 
pursuant to which the joint venture corporation (Summit Asia, Ltd. ("Summit 
Asia")) acquired exclusive rights to sell, distribute and support all of 
Summit's products in the Asia-Pacific regions, excluding Japan. Prior to that 
date, Anam was an independent distributor of Summit's products in Korea. In 
April 1998, the joint venture corporation, Summit Asia, which is 
headquartered in Korea, was renamed Asia Design Corporation ("ADC"). In May 
1998, Summit exchanged a portion of its ownership in ADC for ownership in 
another company located in Hong Kong, Summit Design Asia, Ltd. ("SDA"). SDA 
also acquired an equity investment in ADC. In June 1998, Summit and Anam each 
loaned SDA $750,000, which is guaranteed by ADC. SDA acquired from ADC the 
exclusive rights to sell, distribute and support Summit's products in Asia 
Pacific region, excluding Japan. SDA granted distribution rights to Summit's 
products to ADC for the Asia Pacific region, excluding Japan. For the three 
months ended March 31, 1999 and 1998, sales through SDA and ADC combined 
accounted for approximately 1% and 4% of Summit's revenue, respectively.

The Company accounts for its ownership interest in SDA and ADC on the equity 
method of accounting and, as a result, the Company's share of the earnings 
and losses of SDA and ADC are recognized as income or losses in the Company's 
income statement in "Other income, net." The Company does not expect SDA or 
ADC to recognize a profit for the foreseeable future and thus does not expect 
to recognize income from its investment in SDA or ADC for the foreseeable 
future, if at all. There can be no assurance that the restructuring will 
result in SDA or ADC becoming profitable or that revenue attributable to 
sales in the Asia Pacific region, excluding Japan, would increase.

Approximately 47% and 32% of the Company's total revenue for the three months 
ended March 31, 1999 and 1998, respectively, were attributable to sales made 
outside the United States which includes the Asia Pacific region and Europe. 
Approximately, 29% and 21% of the Company's revenue for the three months 
ended March 31, 1999 and 1998, respectively, were attributable to sales made 
in the Asia Pacific region and approximately 18% and 11% the Company's 
revenue for the three months ended March 31, 1999 and 1998, respectively, 
were attributable to sales made in Europe. The increase in the percentage of 
revenue from sales made outside the United States in 1999 is due to a 
decrease in domestic sales, primarily as a result of the Company ceasing to 
receive revenue from Credence Systems Corporation ("CSC") pursuant to 
an OEM agreement. As of December 31, 1998, CSC had satisfied its obligations 
under the OEM agreement and the Company will not receive any additional 
revenue pursuant to the OEM agreement. The Company expects that international 
revenue will continue to represent a significant portion of its total 
revenue. The Company's international revenue is currently denominated in U.S. 
dollars. As a result, increases in the value of the U.S. dollar relative to 
foreign currencies could make the Company's products more expensive and, 
therefore, potentially less competitive in those markets. The Company pays 
the expenses of its international operations in local currencies and does not 
engage in hedging transactions with respect to such obligations. 
International sales and operations are subject to numerous risks, including 
tariff regulations and other trade barriers, requirements for licenses, 
particularly with respect to the export of certain technologies, 
collectability of accounts receivable, changes in regulatory requirements, 
difficulties in staffing and managing foreign operations and extended payment 
terms. There can be no assurance that such factors will not have a material 
adverse effect on the Company's future international sales and operations 
and, consequently, on the Company's business, financial condition, results of 
operations or cash flows. In addition, financial markets and economies in the 
Asia Pacific region have been experiencing adverse economic conditions. 
Demand for and sales of Summit's products in the Asia Pacific region have 
decreased and there can be no assurance that such adverse economic conditions 
will not worsen or that demand for and sales of Summit's products in such 
region will not further decrease.(1)

----------------------------
(1) This paragraph contains forward-looking statements reflecting current 
expectations. There can be no assurance that the Company's actual future 
performance will meet the Company's current expectations. Investors are 
strongly encouraged to review the section entitled "Additional Risk Factors 
That Could Affect Operating Results and Market Price of Stock" commencing on 
page 18 for a discussion of factors that could affect future performance.


                                      -10-

<PAGE>

On February 28, 1997, Summit completed its acquisition of TriQuest. TriQuest 
develops HDL analysis, optimization, and verification tools for the design of 
high performance, deep submicron integrated circuits. The transaction has 
been accounted for as a "pooling of interest" in accordance with generally 
accepted accounting principles.

Effective July 1, 1997 the Company sold substantially all of the assets used 
in its business of developing and marketing its Test Development Series "TDS" 
Products (the "Asset Sale") to CSC. As of July 1, 1997, TDS products ceased 
to be a source of such revenues. CSC assumed the Company's obligations under 
TDS maintenance contracts entered into prior to the closing and the Company 
has not recognized deferred revenue associated with such contracts since June 
30, 1997.

The Company maintained exclusive rights to its Visual Testbench technology 
and CSC agreed to purchase a minimum of $16 million of Visual Testbench 
licenses over a thirty-month period beginning July 1997, subject to specified 
quarterly maximums and certain additional conditions, and $2 million of 
maintenance over an eighteen-month period beginning July 1997. In December 
1998, the Company and CSC agreed to amend the agreement and as of December 
31, 1998, CSC had satisfied its obligation to purchase $16.0 million of 
Visual Testbench licenses. CSC also obtained shared ownership of the Visual 
Testbench source code in December 1998 and has the right to sell Visual 
Testbench licenses based on the source code received from the Company.

On September 9, 1997, the Company acquired SimTech, a company that develops 
and distributes hardware-software co-verification, code coverage and HDL 
debugging software. The aggregate consideration for the acquisition was 
1,256,800 shares of Summit common stock, 723,200 options to purchase Summit 
common stock and $3.9 million in cash. The transaction was accounted for 
using the purchase method of accounting. Accordingly, SimTech's results of 
operations for the period from September 9, 1997 are included in the 
consolidated statements of operations. The purchase price was allocated to 
the net assets acquired based on their estimated fair market values at the 
date of acquisition.

After discussion with the staff of the Securities and Exchange Commission 
(the "Staff") the Company restated the consolidated financial statements as 
of and for the quarters ended September 30, 1997, March 31, 1998, June 30, 
1998 and September 30, 1998 and as of December 31, 1997 and for the year 
ended December 31, 1997 to reflect a change in the original accounting 
treatment to the September 1997 acquisition of SimTech.

In connection with the acquisition of SimTech, the Company repurchased 
939,000 shares of common stock in a private transaction at an average price of 
$12.30 per share for $11.6 million in September 1997.

On December 23, 1997, the Company announced that the Board of Directors had 
authorized the repurchase of up to 750,000 shares of the Company's Common 
Stock. From January 1, 1998 to May 12, 1998, the Company repurchased 162,500 
shares of its common stock at a cost of $2.3 million. The Company 
subsequently issued these shares through the exercise of stock options during 
the three months ended June 30, 1998. On June 29, 1998, the Company cancelled 
this stock repurchase plan.

On June 30, 1998 the Company completed its acquisition of ProSoft. ProSoft 
develops software tools used to verify embedded systems software prior to the 
availability of a hardware prototype. The aggregate consideration for the 
acquisition (including shares of common stock reserved for issuance upon 
exercise of ProSoft options which were exchanged for options of Summit) was 
248,334 shares of common stock. The transaction has been accounted for as a 
pooling of interests in accordance with generally accepted accounting 
principles. In compliance with such principles, Summit's financial statements 
have been restated to include the accounts of ProSoft as if the acquisition 
had occurred at the beginning of the first period presented.

In September 1998, the Company announced its proposed acquisition of OrCAD, 
Inc. In February 1999, Summit announced that its planned acquisition of 
OrCAD, Inc. had been terminated. During the quarter ended December 31, 1998, 
the Company incurred approximately $1.0 million in costs related to the 
terminated acquisition.


                                      -11-

<PAGE>

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated, certain financial 
data as a percentage of revenue.

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                 March 31,
                                                         ------------------------
                                                           1999          1998
                                                         ----------    ----------
<S>                                                      <C>           <C>
Revenue:
     Product licenses..........................             59.5  %       79.2  %
     Maintenance and services..................             40.5          19.9
     Other.....................................                -           0.9
                                                         ----------    ----------
          Total revenue........................            100.0         100.0
Cost of revenue:
     Product licenses..........................              1.9           1.8
     Maintenance and services..................              3.8           2.2
     Amortization of purchased technologies ...              2.4           1.6
                                                         ----------    ----------
          Total cost of revenue................              8.1           5.6
                                                         ----------    ----------
          Gross profit.........................             91.9          94.4
Operating expenses:
     Research and development..................             39.3          28.3
     Sales and marketing.......................             42.7          29.4
     General and administrative ...............             17.1          10.3
     Amortization of goodwill and other
        intangibles............................             10.2           6.7
     Non-recurring charges (a).................             19.7             -
                                                         ----------    ----------
          Total operating expenses.............            129.0          74.7
                                                         ----------    ----------
Income (loss)from operations...................           (37.1)          19.7
Other income, net..............................              4.3           2.7
                                                         ----------    ----------
Income (loss) before income taxes..............           (32.8)          22.4
Income tax provision...........................                -           8.9
                                                         ----------    ----------
Net income (loss)..............................           (32.8)  %       13.5  %
                                                         ==========    ==========
</TABLE>

(a)   Non-recurring charges relate to severance obligations to certain
      management personnel which will be paid in future periods.

TOTAL REVENUE

Total revenue decreased by 34.2% from $10.4 million for the three months 
ended March 31, 1998 to $6.8 million for the three months ended March 31, 
1999. Sales through one distributor accounted for 26.6% and 21.0% of the 
Company's total revenue for the three months ended March 31, 1999 and 1998, 
respectively. Sales to CSC accounted for 31.2% of the Company's total revenue 
for the three months ended March 31, 1998. Such revenue included $2.9 million 
of Visual Testbench license sales made pursuant to an OEM agreement with CSC. 
As of December 31, 1998, CSC had fully satisfied its obligation to purchase 
Visual Testbench Licenses pursuant to the OEM agreement and the Company does 
not expect to receive any additional revenue from sales of Visual Testbench 
licenses to CSC. The Company did not receive any revenue from CSC for the 
three months ended March 31, 1999. Revenue generated pursuant to another OEM 
agreement accounted for 14.9% and 7.2% of the Company's total revenue for the 
three months ended March 31, 1999 and 1998, respectively.

REVENUE

PRODUCT LICENSES REVENUE

The Company's product licenses revenue is derived from license fees from the 
Company's HLDA products. Product licenses revenue decreased by 50.5% from 
$8.2 million for the three months ended March 31, 1998


                                      -12-

<PAGE>

to $4.1 million for the three months ended March 31, 1999. The decrease in 
product licenses revenue was primarily attributable to the Company ceasing to 
receive revenue from CSC pursuant to the OEM Agreement. The decrease was also 
attributable to decreased sales as a result of the Company hiring fewer sales 
and marketing personnel than planned in the fourth quarter of 1998 and the 
first quarter of 1999 and attrition in the existing sales force during the 
first quarter of 1999.

MAINTENANCE AND SERVICES REVENUE

The Company's maintenance and services revenue is derived from maintenance 
contracts related to the Company's HLDA products and training classes offered 
to purchasers of the Company's software products. Maintenance and services 
revenue increased 33.7% from $2.1 million for the three months ended March 
31, 1998 to $2.8 million for the three months ended March 31, 1999. This 
increase is primarily attributable to maintenance contract renewals by the 
installed base of HLDA customers, and to a lesser extent from non-recurring 
engineering services provided to one customer which is not expected to 
reoccur.

OTHER REVENUE

Other revenue consists of revenue from one-time technology sales and fees 
received for granting distribution rights. Other revenue decreased 100% from 
$92,000 for the three months ended March 31, 1998 to $0 for the three months 
ended March 31, 1999. Although the Company renewed a significant distribution 
agreement the renewal did not include additional fees. As a result, the 
distribution rights fees paid at the inception of the agreement and amortized 
into revenue at $92,000 each quarter over the agreement period were no longer 
be a source of other revenue as of December 31, 1998.

COST OF REVENUE

COST OF PRODUCT LICENSES REVENUE

Cost of product licenses revenue includes product packaging, software 
documentation, labor and other costs associated with handling, packaging and 
shipping product and other production related costs. The cost of product 
licenses revenue decreased 31.6% from $193,000 for the three months ended 
March 31, 1998 to $132,000 for the three months ended March 31, 1999. As a 
percentage of product licenses revenue, the cost of product licenses revenue 
increased from 2.4% of product license revenue for the three months ended 
March 31, 1998 to 3.3% of product license revenue for the three months ended 
March 31, 1999. This increase as a percent of product license revenue was 
primarily due to fixed costs spread over decreased product license revenue.

COST OF MAINTENANCE AND SERVICES REVENUE

Cost of maintenance and services revenue, which consists primarily of 
personnel costs for customer support and training classes offered to 
purchasers of the Company's products, increased 14.2% from $225,000 for the 
three months ended March 31, 1998 to $257,000 for the three months ended 
March 31, 1999. As a percentage of maintenance and services revenue, the cost 
of maintenance and services revenue decreased from 10.9% for the three months 
ended March 31, 1998 to 9.3% for the three months ended March 31, 1999. The 
decrease in the cost of maintenance and services revenue as a percent of 
revenue for the three months ended March 31, 1999 over the same period in 
1998 was primarily the result of increased maintenance and services revenue 
in 1999.

Amortization of Purchased Technologies

The Company recorded $2.4 million of purchased technologies (intangibles) as 
part of the SimTech acquisition which are being amortized to cost of revenue 
on a straight-line basis over periods ranging from two to five years 
beginning September 9, 1997. The Company expensed $165,000 for the three 
months ended March 31, 1999 and 1998.


                                      -13-

<PAGE>

OPERATING EXPENSES

RESEARCH AND DEVELOPMENT

Research and development expenses consist of the engineering and operations 
support costs of developing new products and enhancements to existing 
products and performing quality assurance activities. Research and 
development expenses decreased 8.6% from $2.9 million for the three months 
ended March 31, 1998 to $2.7 million for the three months ended March 31, 
1999. Research and development expenses for the three months ended March 31, 
1998 included $550,000 of compensation expense recorded in connection with 
the Company's acquisition of SimTech in September 1997. The Company recorded 
a total of $4.4 million of compensation expense for shares issued as part of 
the acquisition which were contingent upon continued employment and were 
being expensed as the employment obligation lapsed. This expense was being 
recorded on a straight-line basis over the two year employment obligation 
period. However, in December 1998, the employment agreements to which this 
contingent compensation related were amended to eliminate the continued 
employment obligation and at that time, the remaining unrecorded compensation 
was expensed. Excluding the $550,000 of compensation expense recorded in the 
three months ended March 31, 1998, research and development expense increased 
12.5% from $2.4 million for the three months ended March 31, 1998 to $2.7 
million for the same period in 1999. As a percentage of total revenue, 
research and development expenses (including the $550,000 of compensation 
expense) increased from 28.3% for the three months ended March 31, 1998 to 
39.3% for the three months ended March 31, 1999. The increase in research and 
development expenses as a percent of revenue is the result of decreased total 
revenues for the three months ended March 31, 1999. The Company continues to 
believe that significant investment in research and development is required 
to remain competitive in its markets, and the Company therefore anticipates 
that research and development expense will increase in absolute dollars in 
future periods, but may vary as a percent of revenue.(2)

SALES AND MARKETING

Sales and marketing expenses, consisting primarily of salaries, commissions 
and promotional costs, decreased 4.6% from $3.0 million for the three months 
ended March 31, 1998 to $2.9 million for the three months ended March 31, 
1999. This decrease was primarily attributable to the Company hiring fewer 
sales and marketing personnel than planned in the fourth quarter of 1998 and 
the first quarter of 1999 and attrition in the existing sales force during 
the first quarter of 1999. As a percentage of total revenue, sales and 
marketing expenses increased from 29.4% for the three months ended March 31, 
1998 to 42.7% for the three months ended March 31, 1999. The increase as a 
percentage of total revenue was primarily attributable to the decrease in 
total revenue for 1999. In the future, the Company expects sales and 
marketing expenses to continue to increase in absolute dollars, in part due 
to the hiring of additional sales and marketing personnel.(2)

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of the corporate, 
finance, human resource, information services, administrative, and legal and 
accounting expenses of the Company. General and administrative expenses 
increased 9.9% from $1.1 million for the three months ended March 31, 1998, 
to $1.2 million for the three months ended March 31, 1999. As a percentage of 
total revenue, general and administrative expenses increased from 10.3% for 
the three months ended March 31, 1998 to 17.1% for the three months ended 
March 31, 1999. The increase as a percentage of total revenue was 
attributable to the decrease in total revenue in 1999. The Company expects 
general and administrative expenses to increase in absolute dollars to 
support future sales and operations.(2)

----------------------------
(2) This sentence is a forward-looking statement reflecting current 
expectations. There can be no assurance that the Company's actual future 
performance will meet the Company's current expectations. Investors are 
strongly encouraged to review the section entitled "Additional Risk Factors 
That Could Affect Operating Results and Market Price of Stock" commencing on 
page 18 for a discussion of factors that could affect future performance.


                                      -14-

<PAGE>

AMORTIZATION OF INTANGIBLES AND GOODWILL

The Company recorded $4.1 million in intangibles (excluding $2.4 million of 
purchased technologies) and $3.8 million of goodwill as part of the SimTech 
acquisition which are being amortized to expense on a straight-line basis 
over periods ranging from two to five years beginning September 9, 1997. The 
Company expensed $698,000 for the three months ended March 31, 1999 and 1998, 
respectively.

NON-RECURRING CHARGES

During the three months ended March 31, 1999, the Company recorded $1.3 
million in non-recurring charges related to severance obligations for certain 
management personnel, which will be paid in future periods. The Company did 
not record any non-recurring charges for the three months ended March 31, 
1998.

INTEREST EXPENSE

Interest expense remained constant at $1,000 for the three months ended March 
31, 1999 and 1998. The Company incurred no interest expense associated with 
the Company's bank line of credit for the three months ended March 31, 1999 
and 1998.

OTHER INCOME, NET

Other income consists of interest income associated with available cash 
balances, gains or losses from the sale of property and equipment, the 
Company's pro rata share of the earnings and losses of SDA and ADC and 
foreign exchange rate differences resulting from paying operating expenses of 
foreign operations in the local currency. Other income was $289,000 for the 
three months ended March 31, 1998 and $294,000 for the three months ended 
March 31, 1999.

INCOME TAX PROVISION

The income tax provision decreased from $923,000 for the three months ended 
March 31, 1998 to $0 for the three months ended March 31, 1999. The income 
tax provision for the three months ended March 31, 1998 reflects the 
Company's estimated consolidated tax rate for federal, state and foreign 
taxes of approximately 40% of income. The Company's estimated effective rate 
for the year ending December 31, 1999 is 0%, as the Company does not expect 
to generate either taxable income or net operating losses in 1999.

EFFECTIVE CORPORATE TAX RATES

Prior to 1996, the Company had experienced losses for income tax purposes in 
the United States. In 1997, the Company recognized the benefit of its U.S. 
net operating loss carryforwards and tax credit carryforwards in its 
financial statements.

The Company's Israeli operations are performed entirely by Summit Design 
(EDA) Ltd., which is a separate taxable Israeli entity. The Company's 
existing Israeli production facility has been granted "Approved Enterprise" 
status under the Israeli Investment Law, which entitles the Company to 
reductions in the tax rate normally applicable to Israeli companies with 
respect to the income generated by its "Approved Enterprise" programs. In 
particular, the tax holiday covers the seven year period beginning the first 
year in which Summit Design (EDA) Ltd. generates taxable income from its 
"Approved Enterprise" (after using any available NOLs), provided that such 
benefits will terminate in 2006 regardless of whether the seven year period 
has expired. The tax holiday provides that, during such seven year periods, a 
portion of the Company's taxable income from its Israeli operations will be 
taxed at favorable tax rates. The Company has recently applied for "Approved 
Enterprise" status with respect to a new project and intends to apply in the 
future with respect to additional projects. There can be no assurance that 
the Company will be granted any approvals and therefore there can be no 
assurance the Company will continue to have favorable tax status in Israel. 
Management of the Company intends to permanently reinvest substantially all 
earnings of the Israeli subsidiary


                                      -15-

<PAGE>

outside the U.S. If such earnings were remitted to the U.S., additional U.S. 
federal and foreign taxes may be due.

The Company has foreign income tax net operating losses of approximately $5.6 
million at December 31, 1998. These foreign losses were generated in Israel 
over several years and have not yet received final assessment from the 
Israeli government. Consequently, management is uncertain as to the 
availability of a substantial portion of such foreign loss carryforwards.

The Company is also subject to risk that United States and foreign tax laws 
and rates may change in a future period or periods, and that any such changes 
may materially adversely affect the Company's tax rate. As a result of the 
factors described above and other related factors, there can be no assurance 
that the Company will maintain a favorable tax rate in future periods. Any 
increase in the Company's effective tax rate, or variations in the effective 
tax rate from period to period, could have a material adverse effect on the 
Company's business, financial condition, results of operations and cash flows.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations primarily through a public offering 
in 1996, the private placement of capital stock, as well as capital equipment 
leases, borrowings under its bank line of credit, Israeli research and 
development grants and cash generated from operations. As of March 31, 1999, 
the Company had approximately $23.7 million in cash and cash equivalents. 
Additionally, the Company had a $1.0 million bank line of credit which 
expired on April 30, 1999. The Company does not intend to renew the line of 
credit. As of March 31, 1999, the Company had no borrowings outstanding under 
this line of credit.

The Company is obligated to lend up to $2.5 million to an independent 
software Company pursuant to a secured loan agreement entered into during 
July 1997. Borrowings under the agreement bear interest at prime plus 2%. At 
March 31, 1999, $2.1 million had been advanced to the independent software 
company.

As of March 31, 1999, the Company had working capital of approximately 
$22.3 million.

For the three months ended March 31, 1999, net cash used in operating 
activities was approximately $3.2 million. For the three months ended March 
31, 1998, net cash generated by operating activities was approximately $2.6 
million. Cash used in operations for the three months ended March 31, 1999 
resulted from a net loss plus a reduction in accounts payable and accrued 
liabilities, offset by depreciation and amortization. Cash generated by 
operating activities resulted primarily from profitable operations and 
depreciation and amortization less the decrease in deferred revenue and 
accrued liabilities and the increase in accounts receivable for the three 
months ended March 31, 1998.

Net cash used in investing activities was approximately $828,000 and $577,000 
for the three months ended March 31, 1999 and 1998, respectively. Net cash 
used in investing activities was related to the acquisition of furniture and 
equipment and a loan to an independent software company for the three months 
ended March 31, 1999 and 1998.

Net cash used by financing activities was approximately $28,000 and $1.6 
million for the three months ended March 31, 1999 and 1998, respectively. For 
the three months ended March 31, 1999, the use of cash was primarily from 
debt repayment which was partially offset by proceeds from the issuance of 
common stock through stock options plans For the three months ended March 31, 
1998 the use of cash was primarily from repurchasing 162,500 shares of the 
Company's common stock, less proceeds from the issuance of common stock and a 
tax benefit from option exercises.


                                      -16-

<PAGE>

The Company presently believes that its current cash and cash equivalents 
will satisfy the Company's anticipated working capital and other cash 
requirements for at least the next 12 months.(2)

YEAR 2000

The Year 2000 issue results from computer programs written using two, rather 
than four, digits to define the applicable year. These computer programs may 
recognize a date using "00" as the year 1900 instead of 2000 and cause system 
failures or miscalculations, material disruptions of business operations, 
including, among other things, a temporary inability to process transactions, 
send invoices, or engage in similar normal business operations. If Summit, 
its significant customers, suppliers, service providers and other related 
third parties fail to take the necessary steps to correct or replace these 
problematic computer programs, the Year 2000 issue could have a material 
adverse effect on Summit. Summit cannot, however, quantify the impact at this 
time.

Summit has begun upgrading or replacing the software packages underlying its 
financial, production, communication, desktop and other systems, as 
appropriate, to address the Year 2000 issue. It has also performed an 
in-depth analysis of all of its products and is in the process of modifying 
those products that are not Year 2000 compliant. Moreover, Summit is 
contacting all major external third parties that provide products and 
services to Summit to assess their readiness for the Year 2000.

Management believes it has completed the review and assessment phase of 
affected systems within Summit and those which are external to Summit. This 
assessment indicated that most of Summit's significant internal information 
systems could be affected by the Year 2000 issue, and that Summit could be 
negatively impacted by non-compliance of related third parties. In addition, 
this assessment concluded that certain of Summit's products were also at risk.

Summit has begun the remediation phase of Summit's internal information 
technology systems and has set October 1999 as the target for Year 2000 
compliance of all of Summit's internal information technology systems. 
Summit's internal information technology systems include Summit's finance 
systems and those systems used in the research and development of Summit's 
products.

Summit's products are subject to periodic upgrades. These upgrades are 
typically released to end-users once a year. Summit intends to modify its 
products, as required, in order to make such products Year 2000 compliant by 
July 1999.

Summit is currently in the process of creating contingency plans for its 
internal information technology systems and products. These contingency plans 
are expected to be in place by October 31, 1999. In the event Summit's 
information technology systems and/or products are not Year 2000 compliant by 
October 31, 1999, Summit will decide at that time whether to implement the 
necessary contingency plan(s).

Summit has queried its important suppliers and service providers and is 
presently obtaining assurances and verification from those selected third 
parties that they are or will be Year 2000 complaint. The inability of those 
parties to complete their Year 2000 resolution process could materially 
impact Summit. The effects of non-compliance by third parties where no system 
interface exists is not determinable.

Summit will determine whether a contingency plan is necessary in relation to 
third parties with whom Summit has material relationships once the assessment 
of these third parties' Year 2000 compliance is complete. It is anticipated 
that third party assessment will be complete by July 31, 1999.

Concurrent with performing the above steps, Summit will make certain 
investments in systems, applications and products to address Year 2000 
issues. Summit has not tracked internal resources dedicated to the 

----------------------------
(2) This sentence is a forward-looking statement reflecting current 
expectations. There can be no assurance that the Company's actual future 
performance will meet the Company's current expectations. Investors are 
strongly encouraged to review the section entitled "Additional Risk Factors 
That Could Affect Operating Results and Market Price of Stock" commencing on 
page 18 for a discussion of factors that could affect future performance.


                                      -17-
<PAGE>

resolution of the Year 2000 issue and, therefore, is unable to quantify 
internal costs incurred to date that are associated with the Year 2000 issue. 
Summit has, however, hired external consultants to resolve internal 
information system issues related to the resolution of the Year 2000 issue. 
Identifiable expenditures for these consultants were approximately $250,000 
through December 31, 1998. Expenditures to resolve Year 2000 issues are not 
expected to be material and are expected to be funded through cash generated 
from operations.

Summit's plans to complete the Year 2000 modifications are based upon 
management's best estimates, which were derived utilizing numerous 
assumptions of future events including continued availability of certain 
resources, and other factors. However, there can be no assurance that these 
estimates will be achieved and actual results could differ materially from 
those plans. Specific factors that might cause such material differences 
included the availability and cost of personnel trained in this area, and the 
ability to locate and correct all relevant computer codes.

ADDITIONAL RISK FACTORS THAT COULD AFFECT OPERATING RESULTS AND MARKET PRICE 
OF STOCK

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

FACTORS WHICH MAY CAUSE SUMMIT'S OPERATING RESULTS TO FLUCTUATE. Summit's 
quarterly operating results and cash flows have fluctuated in the past and 
have fluctuated significantly in certain quarters. Such fluctuations resulted 
from several factors including the size and timing of orders, the incurrence 
of a large one-time charge as a result of an acquisition, seasonal factors, 
the rate of acceptance of new products, product, customer and channel mix, 
and lengthy sales cycles. These fluctuations are likely to continue in future 
periods as a result of the factors discussed above and potentially due to 
corporate acquisitions and consolidations and the integration of acquired 
entities and the incurrence of any large one-time charges as a result of any 
acquisitions, the timing of new product announcements and introductions by 
Summit and its competitors, the rescheduling or cancellation of customer 
orders, Summit's ability to continue to develop and introduce new products 
and product enhancements on a timely basis, the level of competition, 
purchasing and payment patterns, pricing policies of Summit and its 
competitors, product quality issues, currency fluctuations and general 
economic conditions.

REVENUE DIFFICULT TO FORECAST. Summit's revenue is difficult to forecast for 
several reasons. Summit operates with little product backlog because its 
products are typically shipped shortly after orders are received. 
Consequently, license backlog at the beginning of any quarter has in the past 
represented only a small portion of that quarter's expected revenue. As a 
result, license fee revenue in any quarter is difficult to forecast because 
it is substantially dependent on orders booked and shipped in that quarter. 
Moreover, Summit generally recognizes a substantial portion of its revenue in 
the last month of the quarter, frequently in the latter part of the month. 
Any significant deferral of purchases of the Company's products could have a 
material adverse effect on the Company's business, financial condition and 
results of operations in any particular quarter, and, to the extent that 
significant sales occur earlier than expected, operating results for 
subsequent quarters may be adversely affected. Quarterly license fee revenue 
is also difficult to forecast because Summit's sales cycle is typically six 
to nine months and varies substantially from customer to customer. In 
addition, a portion of Summit's sales are made through indirect channels and 
can be harder to predict.

SHORTFALLS IN REVENUE COULD ADVERSELY IMPACT QUARTERLY OPERATING RESULTS. 
Summit establishes its expenditure levels for product development, sales and 
marketing and other operating activities based primarily on its expectations 
as to future revenue. Because a high percentage of Summit's expenses are 
relatively fixed in the near term, if revenue in any quarter is below 
expectations, expenditure levels could be disproportionately high as a 
percentage of revenue and Summit's operating results would be materially 
adversely affected.

OPERATING RESULTS LIKELY TO FLUCTUATE. Based upon the factors described 
above, Summit believes that its quarterly revenue, expenses and operating 
results are likely to vary significantly from quarter to quarter, that 
period-to-period comparisons of its operating results are not necessarily 
meaningful and that, as a result, such comparisons should not be relied upon 
as indications of Summit's future performance. Additionally, as of


                                      -18-

<PAGE>

December 31, 1998, CSC had satisfied its obligation to purchase a minimum 
number of Visual Testbench licenses pursuant to an OEM agreement entered into 
in July 1997, and the Company does not expect to receive any additional 
revenue from sales of Visual Testbench to CSC. Summit will need to replace 
this revenue and the failure of Summit to replace this revenue would have a 
material adverse affect on Summit's operating results. In addition, Summit 
operates with high gross margins and as such, a downturn in revenue has had a 
significant impact on income from operations and net income. Due to the 
foregoing or other factors, Summit's results of operations were below 
investors' and market makers' expectations for the quarter ended March 31, 
1999 and are likely to be below investors' and market makers' expectations in 
other quarters, which could have a severe adverse effect on the market price 
of Summit's Common Stock.

DEPENDENCE ON HLDA PRODUCTS

Summit's future success depends primarily upon the broad market acceptance of 
Summit's existing and future HLDA products. Summit commercially shipped its 
first HLDA product, Visual HDL for VHDL, in the first quarter of 1994. For 
the years ended December 31, 1998, 1997 and 1996, revenue from HLDA products 
and related maintenance contracts represented 100%, 88.8%, and 63.9%, 
respectively, of Summit's total revenue. As a result, factors adversely 
affecting sales of these products, including increased competition, inability 
to successfully introduce enhanced or improved versions of these products, 
product quality issues and technological change, could have a material 
adverse effect on Summit's business, financial condition and results of 
operations.

UNCERTAINTY OF BROAD MARKET ACCEPTANCE OF HLDA PRODUCTS

The Company's HLDA products incorporate certain unique design methodologies 
and thus represent a departure from industry standards for design creation 
and verification. The Company believes that broad market acceptance of its 
HLDA products will depend on several factors, including the ability to 
significantly enhance design productivity, ease of use, interoperability with 
existing EDA tools, price and the customer's assessment of the Company's 
financial resources and its technical, managerial, service and support 
expertise. The Company also depends on its distributors to assist the Company 
in gaining market acceptance of its products. There can be no assurance that 
sufficient priority will be given by the Company's distributors to marketing 
the Company's products or whether such distributors will continue to offer 
the Company's products. There can be no assurance that the Company's HLDA 
products will achieve broad market acceptance. A decline in the demand for, 
or the failure to achieve broad market acceptance of, the Company's HLDA 
products will have a material adverse effect on the Company's business, 
financial condition, results of operations or cash flows.

Although demand for HLDA products has increased in recent years, the market 
for HLDA products is still emerging and there can be no assurance that it 
will continue to grow or that, even if the market does grow, businesses will 
continue to purchase the Company's HLDA products. If the market for HLDA 
products fails to grow or grows more slowly than the Company currently 
anticipates, the Company's business, financial condition, results of 
operations or cash flows would be materially adversely affected.

Traditionally, EDA customers have been risk averse in accepting new design 
methodologies. Because many of Summit's tools embody new design 
methodologies, this risk aversion on the part of potential customers presents 
an ongoing marketing and sales challenge to the Company and makes the 
introduction and acceptance of new products unpredictable. The Company's 
Visual Testbench product, introduced in the fourth quarter of 1995, provides 
a new methodology and requires a change in the traditional design flow for 
creating IC test programs. Accordingly, the Company cannot predict the 
extent, to which it will realize revenue from Visual Testbench in excess of 
the revenue already received from CSC pursuant to an OEM agreement entered 
into in July 1997.

COMPETITION

The EDA industry is highly competitive and the Company expects competition to 
increase as other EDA companies introduce HLDA products. In the HLDA market, 
the Company principally competes with


                                      -19-

<PAGE>

Mentor Graphics and a number of smaller firms. Indirectly, the Company also 
competes with other firms that offer alternatives to HLDA and could 
potentially offer more directly competitive products in the future. Certain 
of these companies have significantly greater financial, technical and 
marketing resources and larger installed customer bases than the Company. 
Some of the Company's current and future competitors offer a more complete 
range of EDA products and may distribute products that directly compete with 
the Company's HLDA products by bundling such products with their core product 
line. In addition, the Company's products perform a variety of functions, 
certain of which are, and in the future may be, offered as separate products 
or discrete point solutions by the Company's existing and future competitors. 
For example, certain companies currently offer design entry products without 
simulators. There can be no assurance that such competition will not cause 
the Company to offer point solutions instead of, or in addition to, the 
Company's current software products. Such point solutions would be priced 
lower than the Company's current product offerings and could cause the 
Company's average selling prices to decrease, which could have a material 
adverse effect on the Company's business, financial condition, results of 
operations, or cash flows.

The Company competes on the basis of certain factors including product 
capabilities, product performance, price, support of industry standards, ease 
of use, first to market and customer technical support and service. The 
Company believes that they compete favorably overall with respect to these 
factors. However, in particular cases, the Company's competitors may offer 
HLDA products with functionality which is sought by the Company's prospective 
customers and which differs from that offered by the Company. In addition, 
certain competitors may achieve a marketing advantage by establishing formal 
alliances with other EDA vendors. Further, the EDA industry in general has 
experienced significant consolidation in recent years, and the acquisition of 
one of the Company's competitors by a larger, more established EDA vendor 
could create a more significant competitor. There can be no assurance that 
the Company will be able to compete successfully against current and future 
competitors or that competitive pressures faced by the Company will not have 
a material adverse effect on its business, financial condition, results of 
operations, or cash flows. There can be no assurance that the Company's 
current and future competitors will not be able to develop products 
comparable or superior to those developed by the Company or to adapt more 
quickly than the Company to new technologies, evolving industry trends or 
customer requirements. Increased competition could result in price 
reductions, reduced margins and loss of market share, all of which could have 
a material adverse effect on the Company's business, financial condition, 
results of operations or cash flows.

DEPENDENCE ON ELECTRONICS INDUSTRY MARKET

Because the electronics industry is characterized by rapid technological 
change, short product life cycles, fluctuations in manufacturing capacity and 
pricing and margin pressures, certain segments, including the computer, 
semiconductor, semiconductor test equipment and telecommunications 
industries, have experienced sudden and unexpected economic downturns. During 
these periods, capital spending is commonly curtailed and the number of 
design projects often decreases. Because the Company's sales are dependent 
upon capital spending trends and new design projects, negative factors 
affecting the electronics industry could have a material adverse effect on 
the Company's business, financial condition, results of operations, or cash 
flows. A number of electronics companies, including customers of the Company, 
have recently experienced a slowdown in their businesses. The Company's 
future operating results may reflect substantial fluctuations from period to 
period as a consequence of such industry patterns, general economic 
conditions affecting the timing of orders from customers and other factors.

DEPENDENCE ON THIRD PARTIES FOR PRODUCT INTEROPERABILITY

Because the Company's products must interoperate with EDA products of other 
companies, particularly simulation and synthesis products, the Company must 
have timely access to third party software to perform development and testing 
of its products. Although the Company has established relationships with a 
variety of EDA vendors to gain early access to new product information, these 
relationships may be terminated by either party with limited notice. In 
addition, such relationships are with companies that are current or potential 
future competitors of the Company, including Synopsys, Mentor Graphics and 
Cadence. If any of these relationships were terminated and the Company was 
unable to obtain, in a timely manner, information regarding modifications of 
third party products necessary for modifying its software products to 
interoperate


                                      -20-

<PAGE>

with these third party products, the Company could experience a significant 
increase in development costs, the development process would take longer, 
product introductions would be delayed and the Company's business, financial 
condition, results of operations or cash flows could be materially adversely 
affected.

NEW PRODUCTS AND TECHNOLOGICAL CHANGE; EVOLVING INDUSTRY STANDARDS

The EDA industry is characterized by extremely rapid technological change, 
frequent new product introductions and evolving industry standards. The 
introduction of products embodying new technologies and the emergence of new 
industry standards can render existing products obsolete and unmarketable. In 
addition, customers in the EDA industry require software products that allow 
them to reduce time to market, differentiate their products, improve their 
engineering productivity and reduce their design errors. The Company's future 
success will depend upon its ability to enhance its current products, develop 
and introduce new products that keep pace with technological developments and 
emerging industry standards and address the increasingly sophisticated needs 
of its customers. There can be no assurance that the Company will be 
successful in developing and marketing product enhancements or new products 
that respond to technological change or emerging industry standards, that the 
Company will not experience difficulties that could delay or prevent the 
successful development, introduction and marketing of these products, or that 
its new products will adequately meet the requirements of the marketplace and 
achieve market acceptance. If the Company is unable, for technological or 
other reasons, to develop and introduce products in a timely manner in 
response to changing market conditions, industry standards or other customer 
requirements, particularly if such product releases have been pre-announced, 
the Company's business, financial condition, results of operations or cash 
flows will be materially adversely affected.

RISKS OF SOFTWARE DEFECTS

Software products as complex as those offered by the Company may contain 
errors that may be detected at any point in the products' life cycles. The 
Company has in the past discovered software errors in certain of its products 
and has experienced delays in shipment of products during the period required 
to correct these errors. There can be no assurance that, despite testing by 
the Company and by current and potential customers, errors will not be found, 
resulting in loss of, or delay in, market acceptance and sales, diversion of 
development resources, injury to the Company's reputation or increased 
service and warranty costs, any of which could have a material adverse effect 
on the Company's business, financial condition, results of operations or cash 
flows.

DEPENDENCE ON DISTRIBUTORS

The Company relies on distributors for licensing and support of its products 
outside of North America. Approximately 46%, 24%, 23%, 29% and 46% of the 
Company's revenue for the three months ended March 31, 1999 and 1998 and for 
the years ended December 31, 1998, 1997 and 1996, respectively, were 
attributable to sales made through distributors. Effective April 1, 1996, the 
Company entered into a joint venture with Anam pursuant to which the joint 
venture corporation Summit Asia acquired exclusive rights to sell, distribute 
and support all of the Company's products in the Asia Pacific region, 
excluding Japan. In April 1998, the joint venture corporation, Summit Asia, 
which is headquartered in Korea, was renamed Asia Design Corporation "ADC." 
In May 1998, Summit exchanged a portion of its ownership in ADC for ownership 
in another company located in Hong Kong which was renamed Summit Design Asia, 
Ltd. "SDA." SDA also has an equity investment in ADC. In June 1998, Summit 
and Anam each loaned SDA $750,000, which is guaranteed by ADC. SDA acquired 
from ADC the exclusive rights to sell, distribute and support Summit's 
products in the Asia Pacific region, excluding Japan. SDA granted 
distribution rights to Summit's products to ADC for the Asia Pacific region, 
excluding Japan. There can be no assurance that this restructuring will 
result in Summit Asia or ADC becoming profitable or that revenue attributable 
to sales in the Asia Pacific region, excluding Japan, would increase. In 
addition, in the first quarter of 1996, the Company entered into a 
three-year, exclusive distribution agreement for its HLDA products in Japan 
with Seiko. The agreement is renewable for successive five-year terms by 
mutual agreement of the Company and Seiko and is terminable by either party 
for breach. The agreement was renewed for an additional five-year term which 
began in February 1999. In the event Seiko fails to meet specified quotas for 
two or more quarterly periods, exclusivity can be terminated by Summit, 
subject to Seiko's right to pay a specified fee to


                                      -21-

<PAGE>

maintain exclusivity. Sales through Seiko accounted for 27%, 21%, 18%, 15%, 
and 15%, of Summit's total revenue for the three months ended March 31, 1999 
and 1998 and for the years ended December 31, 1998, 1997, and 1996, 
respectively.

There can be no assurance that Summit's relationships with Seiko, SDA, and 
ADC will be effective in maintaining or increasing sales relative to the 
levels experienced prior to such relationships. The Company also has 
independent distributors in Europe and is dependent on the continued 
viability and financial stability of its distributors. Since the Company's 
products are used by skilled design engineers, distributors must possess 
sufficient technical, marketing and sales resources and must devote these 
resources to a lengthy sales cycle, customer training and product service and 
support. Only a limited number of distributors possess these resources. In 
addition, Seiko, SDA and ADC, as well as the Company's other distributors, 
may offer products of several different companies, including competitors of 
the Company. There can be no assurance that the Company's current 
distributors will continue to market or service and support the Company's 
products effectively, that any distributor will continue to sell the 
Company's products or that the distributors will not devote greater resources 
to products of other companies. The loss of, or a significant reduction in, 
revenue from the Company's distributors could have a material adverse effect 
on the Company's business, financial condition, results of operations or cash 
flows.

INTERNATIONAL SALES AND OPERATIONS

Approximately 47%, 32%, 36%, 34%, and 50% of Summit's revenue for the three 
months ended March 31, 1999 and 1998 and for the years ended December 31, 
1998, 1997 and 1996, respectively, were attributable to sales made outside 
the United States, which includes the Asia Pacific region and Europe. 
Approximately, 29%, 21%, 22%, 22%, and 34% of Summit's revenue for the three 
months ended March 31, 1999 and 1998 and for the years ended December 31, 
1998, 1997 and 1996, respectively, were attributable to sales made in the 
Asia Pacific region and approximately 18%, 11%, 14%, 12% and 16% of Summit's 
revenue for the three months ended March 31, 1999 and 1998 and for the years 
ended December 31, 1998, 1997 and 1996, respectively, were attributable to 
sales made in Europe. The Company expects that international revenue will 
continue to represent a significant portion of its total revenue. The 
Company's international revenue is currently denominated in U.S. dollars. As 
a result, increases in the value of the U.S. dollar relative to foreign 
currencies could make the Company's products more expensive and, therefore, 
potentially less competitive in those markets. The Company pays the expenses 
of its international operations in local currencies and does not engage in 
hedging transactions with respect to such obligations. International sales 
and operations are subject to numerous risks, including tariff regulations 
and other trade barriers, requirements for licenses, particularly with 
respect to the export of certain technologies, collectability of accounts 
receivable, changes in regulatory requirements, difficulties in staffing and 
managing foreign operations and extended payment terms. There can be no 
assurance that such factors will not have a material adverse effect on the 
Company's future international sales and operations and, consequently, on the 
Company's business, financial condition, results of operations or cash flows. 
In addition, financial markets and economies in the Asia Pacific region have 
been experiencing adverse economic conditions. Demand for and sales of 
Summit's products in the Asia Pacific region have decreased and there can be 
no assurance that such adverse economic conditions will not worsen or that 
demand for and sales of Summit's products in such region will not further 
decrease.

In order to successfully expand international sales, the Company may need to 
establish additional foreign operations, hire additional personnel and 
recruit additional international distributors. This will require significant 
management attention and financial resources and could adversely affect the 
Company's operating margins. In addition, to the extent that the Company is 
unable to effect these additions in a timely manner, the Company's growth, if 
any, in international sales will be limited. There can be no assurance that 
the Company will be able to maintain or increase international sales of the 
Company's products, and failure to do so could have a material adverse effect 
on the Company's business, financial condition, results of operations or cash 
flows.

MANAGEMENT OF GROWTH AND ACQUISITIONS

Summit's ability to achieve significant growth will require it to implement 
and continually expand its operational and financial systems, recruit 
additional employees and train and manage current and future


                                      -22-

<PAGE>

employees. Summit expects any such growth will place a significant strain on 
its operational resources and systems. Failure to effectively manage any such 
growth would have a material adverse effect on Summit's business, financial 
condition, results of operations or cash flows.

The Company has consummated a series of acquisitions including the 
acquisition of TriQuest in February 1997, SimTech in September 1997, and 
ProSoft in June 1998 and regularly evaluates acquisition opportunities. 
Future acquisitions by Summit, if any, could result in potentially dilutive 
issuances of equity securities, the incurrence of debt and contingent 
liabilities, amortization expenses related to goodwill and other intangible 
assets, and large one-time charges which could materially adversely affect 
Summit's results of operations. Product and technology acquisitions entail 
numerous risks, including difficulties in the assimilation of acquired 
operations, technologies and products, diversion of management's attention to 
other business concerns, risks of entering markets in which Summit has no or 
limited prior experience and potential loss of key employees of acquired 
companies. Summit's management has had limited experience in assimilating 
acquired organizations and products into Summit's operations. No assurance 
can be given as to the ability of Summit to integrate successfully any 
operations, personnel or products that have been acquired or that might be 
acquired in the future, and the failure of Summit to do so could have a 
material adverse effect on Summit's results of operations.

OPERATIONS IN ISRAEL

RISKS ASSOCIATED WITH OPERATING IN ISRAEL. The Company's research and 
development operations related to its Visual HDL products are located in 
Israel and may be affected by economic, political and military conditions in 
that country. Accordingly, the Company's business, financial condition and 
results of operations could be materially adversely affected if hostilities 
involving Israel should occur. This risk is heightened due to the 
restrictions on the Company's ability to manufacture or transfer outside of 
Israel any technology developed under research and development grants from 
the government of Israel as described in "--Israeli Research, Development and 
Marketing Grants." In addition, while all of the Company's sales are 
denominated in U.S. dollars, a portion of the Company's annual costs and 
expenses in Israel are paid in Israeli currency. These costs and expenses 
were approximately $5.2, $4.7 and $4.3 million in 1998, 1997 and 1996, 
respectively. Payment in Israeli currency subjects the Company to foreign 
currency fluctuations and to economic pressures resulting from Israel's 
generally high rate of inflation, which has been approximately 9%, 7% and 11% 
during 1998, 1997, and 1996, respectively. The Company's primary expense 
which is paid in Israeli currency is employee salaries for research and 
development activities. As a result, an increase in the value of Israeli 
currency in comparison to the U.S. dollar could increase the cost of research 
and development expenses and general and administrative expenses. There can 
be no assurance that currency fluctuations, changes in the rate of inflation 
in Israel or any of the other aforementioned factors will not have a material 
adverse effect on the Company's business, financial condition, results of 
operations, or cash flows. In addition, coordination with and management of 
the Israeli operations requires the Company to address differences in 
culture, regulations and time zones. Failure to successfully address these 
differences could be disruptive to the Company's operations.

RISKS ASSOCIATED WITH "APPROVED ENTERPRISE" STATUS. The Company's Israeli 
production facility has been granted the status of an "Approved Enterprise" 
under the Israeli Investment Law for the Encouragement of Capital 
Investments, 1959 (the "Investment Law"). Taxable income of a company derived 
from an "Approved Enterprise" is eligible for certain tax benefits, including 
significant income tax rate reductions for up to seven years following the 
first year in which the "Approved Enterprise" has Israeli taxable income 
(after using any available net operating losses). The period of benefits 
cannot extend beyond 12 years from the year of commencement of operations or 
14 years from the year in which approval was granted, whichever is earlier. 
The tax benefits derived from a certificate of approval for an "Approved 
Enterprise" relate only to taxable income attributable to such "Approved 
Enterprise" and are conditioned upon fulfillment of the conditions stipulated 
by the Investment Law, the regulations promulgated thereunder and the 
criteria set forth in the certificate of approval. In the event of a failure 
by the Company to comply with these conditions, the tax benefits could be 
canceled, in whole or in part, and the Company would be required to refund 
the amount of the canceled benefits, adjusted for inflation and interest. No 
"Approved Enterprise" tax benefits had been realized by Summit from its 
Israeli operations as of December 31, 1995 since the Israeli operations were 
still incurring losses at that time. During 1996, Summit realized income of 
$1.4


                                      -23-

<PAGE>

million from its Israeli operations and "Approved Enterprise" tax benefits of 
$53,000. During 1997, Summit realized income of $2.7 million from its Israeli 
operations and "Approved Enterprise" tax benefits of $702,000. During 1998, 
Summit realized income of $4.3 million from its Israeli operations and 
"Approved Enterprise" tax benefits of $1.9 million. Summit has recently 
applied for "Approved Enterprise" status with respect to a new project and 
intends to apply in the future with respect to additional projects. However, 
there can be no assurance that the Company's Israeli production facility will 
continue to operate or qualify as an "Approved Enterprise" or that the 
benefits under the "Approved Enterprise" regulations will continue, or be 
applicable, in the future. Management of Summit intends to permanently 
reinvest earnings of the Israeli subsidiary outside the U.S. If such earnings 
were remitted to the U.S., additional U.S. federal and foreign taxes may be 
due. The loss of, or any material decrease in, these income tax benefits 
could have a material adverse effect on the Company's business, financial 
condition, results of operations or cash flows.

DEPENDENCE ON KEY PERSONNEL

The Company's success will continue to depend in large part on its key 
technical and management personnel and its ability to continue to attract and 
retain highly-skilled technical, sales and marketing and management 
personnel. The Company has entered into employment agreements with certain of 
its executive officers, however, such agreements do not guarantee the 
services of these employees and do not contain non-competition provisions. In 
addition, the Company recently entered into new employment agreements with 
Larry Gerhard, the Company's Chief Executive Officer, and C. Albert Koob, the 
Company's Chief Financial Officer. Mr. Gerhard is currently entitled to 
certain guaranteed severance payments and has been provided incentives to 
remain with the Company through June 30, 1999. The Company currently expects 
that Mr. Gerhard will retire on or before December 31, 1999, most likely as 
soon as this summer. However, the exact timing of his retirement will depend 
on developments at the Company as well as personal considerations. The 
Company is currently seeking a qualified replacement for Mr. Gerhard. Mr. 
Koob's employment agreement provides that he is entitled to certain 
guaranteed severance payments if he remains employed through July 31, 1999. 
However, there can be no assurance that Mr. Koob will continue his employment 
until such date. The Company's failure to timely hire suitable replacements 
for either Mr. Gerhard or Mr. Koob prior to or after their departure could 
have a material adverse effect on Summit.

Competition for personnel in the software industry in general, and the EDA 
industry in particular, is intense, and the Company has at times in the past 
experienced difficulty in recruiting qualified personnel. There can be no 
assurance that the Company will retain its key personnel or that it will be 
successful in attracting and retaining other qualified technical, sales and 
marketing and management personnel in the future. The loss of any key 
employees or the inability to attract and retain additional qualified 
personnel may have a material adverse effect on the Company's business, 
financial condition, results of operations or cash flows. The Company has 
obtained a $1 million "key person" life insurance policy on its Chief 
Executive Officer. Additions of new personnel and departures of existing 
personnel, particularly in key positions, can be disruptive and can result in 
departures of additional personnel, which could have a material adverse 
effect on the Company's business, financial condition, results of operations 
or cash flows.

NEED TO BUILD AND EXPAND SALES AND MARKETING ORGANIZATIONS

The Company's success will depend on its ability to build and expand its 
sales and marketing organizations. The Company hired fewer sales and 
marketing personnel than planned in the fourth quarter of 1998 and the first 
quarter of 1999 and experienced attrition in the existing sales force during 
the first quarter of 1999. As a result of the lack of sales people, the 
Company's revenues for the fourth quarter of 1998 and first quarter of 1999 
were lower than expected. In February 1999, the Company's Senior Vice 
President of Worldwide Marketing and Sales resigned. The Company is seeking a 
Vice President of Sales and a Vice President of Marketing. The Company's 
future success will depend in part on its ability to hire and retain 
qualified sales and marketing personnel and the ability of these new persons 
to rapidly and effectively transition into their new positions. Competition 
for qualified sales and marketing personnel is intense, and the Company may 
not be able to hire and retain the number of sales and marketing personnel 
needed which would have a material adverse effect on the Company's business, 
financial condition, results of operations or cash flows.


                                      -24-

<PAGE>

ISRAELI RESEARCH, DEVELOPMENT AND MARKETING GRANTS

Summit's Israeli subsidiary obtained research and development grants from the 
Chief Scientist in the Israeli Ministry of Industry and Trade of 
approximately $232,000 and $608,000 in 1993 and 1995, respectively. As of 
December 31, 1997, all amounts have been repaid. The terms of the grants 
prohibit the manufacture of products developed under these grants outside of 
Israel and the transfer of the technology developed pursuant to these grants 
to any person, without the prior written consent of the Chief Scientist. The 
Company's Visual HDL for VHDL products have been developed under grants from 
the Chief Scientist and thus are subject to these restrictions. If the 
Company is unable to obtain the consent of the government of Israel, the 
Company would be unable to take advantage of potential economic benefits such 
as lower taxes, lower labor and other manufacturing costs and advanced 
research and development facilities that may be available if such technology 
and manufacturing operations could be transferred to locations outside of 
Israel. In addition, the Company would be unable to minimize risks particular 
to operations in Israel, such as hostilities involving Israel. Although the 
Company is eligible to apply for additional grants from the Chief Scientist, 
it has no present plans to do so. The Company received a Marketing Fund Grant 
from the Israeli Ministry of Industry and Trade for an aggregate of $423,000. 
The grant must be repaid at the rate of 3% of the increase in exports over 
the 1993 export level of all Israeli products, until repaid. As of March 31, 
1999, approximately $92,000 was outstanding under the grant.

LIMITATIONS ON PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

NO ASSURANCE THAT EFFORTS TO PROTECT PROPRIETARY TECHNOLOGY WILL SUCCEED. The 
Company's success depends in part upon its proprietary technology. The 
Company relies on a combination of copyright, trademark and trade secret 
laws, confidentiality procedures, licensing arrangements and technical means 
to establish and protect its proprietary rights. As part of its 
confidentiality procedures, the Company generally enters into non-disclosure 
agreements with its employees, distributors and corporate partners, and 
limits access to, and distribution of, its software, documentation and other 
proprietary information. In addition, the Company's products are protected by 
hardware locks and software encryption techniques designed to deter 
unauthorized use and copying. Despite these precautions, it may be possible 
for a third party to copy or otherwise obtain and use the Company's products 
or technology without authorization, or to develop similar technology 
independently.

The Company provides products to end-users primarily under "shrink-wrap" 
license agreements included within the packaged software. In addition, the 
Company delivers certain of its verification products electronically under an 
electronic version of a "shrink-wrap" license agreement. These agreements are 
not negotiated with or signed by the licensee, and thus may not be 
enforceable in certain jurisdictions. In addition, the laws of some foreign 
countries do not protect the Company's proprietary rights as fully as do the 
laws of the United States. There can be no assurance that the Company's means 
of protecting its proprietary rights in the United States or abroad will be 
adequate or that competitors will not independently develop similar 
technology.

RISKS OF INFRINGEMENT CLAIMS. The Company could be increasingly subject to 
infringement claims as the number of products and competitors in the 
Company's industry segment grows, the functionality of products in its 
industry segment overlaps and an increasing number of software patents are 
granted by the United States Patent and Trademark Office. There can be no 
assurance that a third party will not claim such infringement by the Company 
with respect to current or future products. Any such claims, with or without 
merit, could be time-consuming, result in costly litigation, cause product 
delays or require the Company to enter into royalty or licensing agreements. 
Such royalty or license agreements, if required, may not be available on 
terms acceptable to the Company or at all. Failure to protect its proprietary 
rights or claims of infringement could have a material adverse effect on the 
Company's business, financial condition, results of operations or cash flows.

POSSIBLE VOLATILITY OF STOCK PRICE

The stock markets have experienced price and volume fluctuations that have 
particularly affected technology companies, resulting in changes in the 
market prices of the stocks of many companies which may not have


                                      -25-

<PAGE>

been directly related to the operating performance of those companies. Such 
broad market fluctuations may adversely affect the market price of the Common 
Stock. In addition, factors such as announcements of technological 
innovations or new products by the Company or its competitors, market 
conditions in the computer software or hardware industries and quarterly 
fluctuations in the Company's operating results may have a significant 
adverse effect on the market price of the Company's Common Stock.

YEAR 2000

Summit is currently reviewing its products, internal systems and 
infrastructure in order to identify and modify those products and systems 
that are not Year 2000 compliant. Summit expects any required modification to 
be made on a timely basis and does not believe that the cost of any such 
modification will have a material adverse effect on Summit's operating 
results. There can be no assurance, however, that there will not be a delay 
in, or increased costs associated with, implementation of any such 
modifications and inability to implement such modifications could have an 
adverse effect on Summit's future operating results.

ITEM 3    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from interest rate changes, foreign 
currency fluctuations, and changes in the market values of its investments.

INTEREST RATE RISK. The Company invests its excess cash in debt instruments 
of the U.S. Government and its agencies, and in high-quality corporate 
issuers and, by policy, limits the amount of credit exposure to any one 
issuer. The Company attempts to protect and preserve its invested funds by 
limiting default, market and reinvestment risk.

Investments in both fixed rate and floating rate interest earning instruments 
carry a degree of interest rate risk. Fixed rate securities may have their 
fair market value adversely impacted due to a rise in interest rates, while 
floating rate securities may produce less income than expected if interest 
rates fall. Due in part to these factors, the Company's future investment 
income may fall short of expectations due to changes in interest rates and 
the Company may suffer losses in principal if forced to sell securities which 
have declined in market value due to changes in interest rates.

FOREIGN CURRENCY RISK. The Company pays the expenses of its international 
operations in local currencies. The Company's international operations are 
subject to risks typical of an international business, including, but not 
limited to: differing economic conditions, changes in political climate, 
differing tax structures, other regulations and restrictions, and foreign 
exchange rate volatility. Accordingly, the Company's future results could be 
materially adversely impacted by changes in these or other factors.

The Company is also exposed to foreign exchange rate fluctuations as they 
relate to operating expenses as the financial results of foreign subsidiaries 
are translated into U.S. dollars in consolidation. As exchange rates vary, 
these results, when translated, may vary from expectations and adversely 
impact overall expected profitability. The effect of foreign exchange rate 
fluctuations on the Company in 1999 was not material.

INVESTMENT RISK. The Company has made equity investments in ADC and SDA and 
has provided loans to ADC and a privately-held, independent software company 
for business and strategic purposes. These investments are included in other 
long-term assets and are accounted for under the equity method when ownership 
is greater than 20% and the Company does not exert control. For these 
investments in privately-held companies, the Company's policy is to regularly 
review the assumptions underlying the operating performance and cash flow 
forecasts in assessing the carrying values. The Company identifies and 
records impairment losses on long-lived assets when events and circumstances 
indicate that such assets might be impaired.


                                      -26-

<PAGE>

PART II

Item 1.  Legal Proceedings

         Not applicable

Item 2.  Changes in Securities

         Not applicable

Item 3.  Defaults Upon Senior Securities

         Not applicable

Item 4.  Submission of Matters to a Vote of Security Holders

         Not applicable

Item 5.  Other Information

         Not applicable

Item 6   Exhibits and Reports on Form 8-K

         (a)  Exhibits

              10.34        Amendment to Employment Agreement between the 
                           Registrant and Larry J. Gerhard
                           dated April 30, 1999
              27.1         Financial Data Schedule

         (b)  Reports on Form 8-K

                 On February 2, 1999, the Company filed a Current Report on
                 Form 8-K dated February 2, 1999 in connection with the
                 termination of the proposed acquisition of OrCAD, Inc.






                                      -27-

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the 
Registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.

                                   SUMMIT DESIGN, INC.

                                   By:  /s/ C. Albert Koob
                                        -------------------------------------

                                        C. Albert Koob
                                        Vice President - Finance,
                                        Chief Financial Officer and Secretary
                                        (Principal Financial and Accounting
                                        Officer and Duly Authorized Officer)

Date:  May 13, 1999








                                      -28-

<PAGE>

EXHIBIT INDEX

EXHIBIT 10.34     Amendment to Employment Agreement between the Registrant and 
                  Larry J. Gerhard dated April 30, 1999

EXHIBIT  27.1     Financial Data Schedule








                                      -29-