<PAGE>   1
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                ----------------
                                    FORM 10-Q
                                ----------------

(Mark One)
[X]   Quarterly report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the period ended December 31, 2000

                                       OR

[ ]   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

Commission file number:  000-23649

                            ARTISAN COMPONENTS, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
   <S>                                   <C>
               DELAWARE                                77-0278185
   (State or other jurisdiction of       (I.R.S. Employer Identification Number)
    incorporation or organization)
</TABLE>

                               1195 Bordeaux Drive
                           Sunnyvale, California 94089
                    (Address of principal executive offices)

                         Telephone Number (408) 734-5600
              (Registrant's telephone number, including area code)

     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 January 31, 2001 there were 16,369,377 shares of the Registrant's Common
Stock outstanding.
================================================================================



<PAGE>   2

                            ARTISAN COMPONENTS, INC.

                                    Form 10-Q

                                      INDEX


<TABLE>
<CAPTION>
                                                                        Page No.
                                                                        --------
<S>                                                                     <C>
Cover Page..................................................................1
Index.......................................................................2

PART I - Financial Information

     ITEM 1 - Financial statements

     Condensed Consolidated Balance Sheets as of December 31 and
                  September 30, 2000........................................3
     Condensed Consolidated Statements of Operations for the
                  Three Months Ended December 31, 2000 and 1999.............4
     Condensed Consolidated Statements of Cash Flows for the
                  Three Months Ended December 31, 2000 and 1999.............5
     Notes to Condensed Consolidated Financial Statements...................6

     ITEM 2 - Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.......................9

     ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk...16

PART II - Other Information

     ITEM 6 - Exhibits and Reports on Form 8-K.............................27


Signatures.................................................................28
</TABLE>



                                        2
<PAGE>   3

                            ARTISAN COMPONENTS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                   December 31,  September 30,
                                                       2000         2000(1)
                                                   ------------  -------------
                                                    (Unaudited)
<S>                                                <C>            <C>
                       ASSETS
Current assets:
  Cash and cash equivalents ....................      $33,894      $33,278
  Marketable securities ........................       19,225       20,738
  Contract receivables, net ....................        8,995        7,722
  Prepaid expenses and other current assets ....        1,699        1,129
  Deferred tax asset, current portion ..........        2,443        2,443
                                                      -------      -------
    Total current assets .......................       66,256       65,310
Property and equipment, net ....................        4,379        4,809
Deferred tax asset, long-term portion ..........        1,608        1,608
Other assets ...................................          203          203
                                                      -------      -------
    Total assets ...............................      $72,446      $71,930
                                                      =======      =======
        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable and accrued expenses ........      $ 4,037      $ 3,651
  Deferred revenue, current portion ............        3,703        4,590
                                                      -------      -------
    Total current liabilities ..................        7,740        8,241
Deferred revenue, long-term portion ............          139          117
Other liabilities ..............................          118          118
                                                      -------      -------
    Total liabilities ..........................        7,997        8,476
                                                      -------      -------
Stockholders' Equity:
 Common Stock, $0.001 par value:
  Authorized: 50,000 shares;
  Issued and outstanding: 14,779 and 14,730
   shares at December 31, 2000 and September 30,
   2000, respectively ..........................           15           15
 Additional paid in capital ....................       59,905       59,609
 Retained earnings .............................        4,529        3,830
                                                      -------      -------
    Total stockholders' equity .................       64,449       63,454
                                                      -------      -------
    Total liabilities and stockholders' equity..      $72,446      $71,930
                                                      =======      =======
</TABLE>
-------
(1)   Derived from the Registrant's audited balance sheet as of September 30,
      2000.


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



                                        3
<PAGE>   4

                            ARTISAN COMPONENTS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                Three Months Ended
                                                   December 31,
                                              ----------------------
                                                2000          1999
                                              --------      --------
<S>                                           <C>           <C>
Revenue:
   License .............................      $  4,462      $  4,445
   Net royalty .........................         1,092           616
                                              --------      --------
    Total revenue ......................         5,554         5,061
                                              --------      --------
Cost and expenses:
   Cost of revenue .....................         1,021         1,454
   Product development .................         2,279         1,642
   Sales and marketing .................         1,426         1,673
   General and administrative ..........           669           540
                                              --------      --------
    Total cost and expenses ............         5,395         5,309
                                              --------      --------
Operating income (loss) ................           159          (248)
Other income, net ......................           900           684
                                              --------      --------
Income before provision for income
 taxes..................................         1,059           436
Provision for income taxes .............           360           144
                                              --------      --------
Net income .............................      $    699      $    292
                                              ========      ========
Basic net income per share .............      $   0.05      $   0.02
                                              ========      ========
Diluted net income per share ...........      $   0.05      $   0.02
                                              ========      ========
Shares used in computing:
  Basic net income per share ...........        14,767        13,987
  Diluted net income per share .........        15,140        15,210
</TABLE>



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



                                        4
<PAGE>   5

                            ARTISAN COMPONENTS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                December 31,
                                                          -----------------------
                                                            2000          1999
                                                          --------       --------
<S>                                                       <C>            <C>
Cash flows from operating activities:
  Net income .......................................      $    699       $    292
  Adjustments to reconcile net income to net cash
   used in operating activities:
    Depreciation and amortization ..................           603            726
    Gain on sale of fixed assets ...................           (37)           (22)
    Compensation expense for options granted .......            11             22
    Changes in assets and liabilities:
      Contract receivables .........................        (1,273)        (1,931)
      Prepaid expenses and other assets ............          (620)          (187)
      Accounts payable and accrued liabilities .....           386           (555)
      Deferred revenue and long term liabilities ...          (828)           245
                                                          --------       --------
        Net cash used in operating activities ......        (1,059)        (1,410)
                                                          --------       --------
Cash flows from investing activities:
  Acquisition of property and equipment ............          (173)          (312)
  Proceeds from sale of property and equipment .....            50             30
  Purchase of marketable securities ................       (12,335)       (11,897)
  Proceeds from sale of marketable securities ......        13,848          9,136
                                                          --------       --------
        Net cash provided by (used in) investing
          activities ...............................         1,390         (3,043)
                                                          --------       --------
Cash flows from financing activities:
  Proceeds from issuance of Common Stock ...........           285            669
                                                          --------       --------
        Net cash provided by financing activities ..           285            669
                                                          --------       --------
Net increase (decrease) in cash and cash
 equivalents........................................           616         (3,784)
Cash and cash equivalents, beginning of period .....        33,278         15,233
                                                          --------       --------
Cash and cash equivalents, end of period ...........      $ 33,894       $ 11,449
                                                          ========       ========
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
  Fixed asset acquisitions in exchange for
      accounts payable .............................      $     --       $     64
                                                          ========       ========
</TABLE>



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



                                        5
<PAGE>   6

                            ARTISAN COMPONENTS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1. BASIS OF CONSOLIDATION AND PRESENTATION:

The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary after elimination of all inter-company
transactions. The Company's fiscal year ends September 30.

The accompanying unaudited condensed consolidated financial statements of
ARTISAN COMPONENTS, INC. ("Artisan" or the "Company") have been prepared in
accordance with generally accepted accounting principles ("GAAP") for interim
financial information and in accordance with the rules and regulations of the
Securities and Exchange Commission ("SEC"). Accordingly, they do not include all
of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. The September 30, 2000 fiscal year end balance sheet data was derived
from the audited financial statements and does not include all disclosures
required by GAAP. Operating results for the three month period ended December
31, 2000 are not necessarily indicative of the results that may be expected for
the fiscal year ending September 30, 2001 or any other future period. The
unaudited condensed consolidated interim financial statements contained herein
should be read in conjunction with the audited consolidated financial statements
and footnotes for the year ended September 30, 2000 included in the Company's
Annual Report on Form 10-K as filed with the SEC.

2. USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and to disclose contingent
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reported period. Actual results could differ
from those estimates.

3. EARNINGS PER SHARE (EPS) DISCLOSURES:

Basic and diluted earnings per share are computed in accordance with Statement
of Financial Accounting Standards No. 128 ("SFAS 128"). Basic EPS is computed by
dividing net income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS is computed
giving effect to all dilutive potential common shares that were outstanding
during the period. Dilutive potential common shares consist of the incremental
common shares issuable upon the conversion of convertible preferred stock (using
the "if converted" method) and exercise of stock options and warrants for all
periods. Dilutive potential common shares are not included during periods in
which the Company experienced a net loss, as the impact would be anti-dilutive.

In accordance with the disclosure requirements of SFAS 128, a reconciliation of
the numerator and denominator of basic and diluted EPS is provided as follows
(in thousands, except per share amounts):



                                        6
<PAGE>   7

                            ARTISAN COMPONENTS, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
                                   (Unaudited)


3. EARNINGS PER SHARE (EPS) DISCLOSURES (con't):

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                              December 31,
                                                          --------------------
                                                           2000          1999
                                                          -------      -------
<S>                                                       <C>          <C>
Numerator--Basic and Diluted EPS
  Net income ........................................     $   699      $   292
                                                          =======      =======
Denominator--Basic EPS
  Common stock outstanding ..........................      14,767       13,987
                                                          -------      -------
Basic net income per share ..........................     $  0.05      $  0.02
                                                          =======      =======
Denominator--Diluted EPS
  Denominator--Basic EPS ............................      14,767       13,987
  Effect of Dilutive Securities Common stock
    Options(1) ......................................         373        1,223
                                                          -------      -------
                                                           15,140       15,210
                                                          -------      -------
Diluted net income per share ........................     $  0.05      $  0.02
                                                          =======      =======
</TABLE>
(1) 1,767,419 shares of common stock options outstanding were not included in
the per share calculation in the first quarter of fiscal 2001. 229,062 shares of
common stock options outstanding were not included in the per share calculation
in the first quarter of fiscal 2000.

4. NEW ACCOUNTING STANDARDS:

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Investments and Hedging Activities." The
statement establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement also requires that changes
in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. The adoption of SFAS No. 133 on
October 1, 2000 did not have a material effect on the Company's financial
position or results of operations.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"),
"Revenue Recognition in Financial Statements." SAB 101 provides guidance on
applying GAAP to revenue recognition issues in financial statements. The
adoption of SAB 101 on October 1, 2000 did not have a material effect on the
Company's financial position or results of operations.



                                        7
<PAGE>   8

                            ARTISAN COMPONENTS, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
                                   (Unaudited)

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation -- an Interpretation of APB Opinion
No. 25" ("FIN 44"). This Interpretation clarifies the definition of employee for
purposes of applying Accounting Practice Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"), the criteria for determining whether a
plan qualifies as a noncompensatory plan, the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and the
accounting for an exchange of stock compensation awards in a business
combination. The Interpretation is effective July 1, 2000, but certain
conclusions in this Interpretation cover specific events that occur after either
December 15, 1998 or January 12, 2000. To the extent that FIN 44 covers events
occurring during the period after December 15, 1998 or January 12, 2000, but
before the effective date of July 1, 2000, the effects of applying this
Interpretation are recognized on a prospective basis from July 1, 2000. The
adoption of FIN 44 did not have a material effect on the Company's financial
position or results of operations.

5. COMPREHENSIVE INCOME:

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes requirements for
disclosure of comprehensive income and became effective for the Company for its
fiscal year 1999, with reclassification of earlier financial statements for
comparative purposes. Comprehensive income generally represents all changes in
stockholders' equity except those resulting from investments of contributions by
stockholders. SFAS 130 requires unrealized gains or losses on the Company's
available-for-sale securities, which prior to adoption were reported separately
in stockholders' equity, to be included in other comprehensive income. The
Company has adopted SFAS 130; however, the effect of the adoption was immaterial
to all periods presented.

6. BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION:

The Company currently operates in one industry segment, the semiconductor
intellectual property segment, for financial reporting purposes, and uses one
measure of profitability for its business. The Company markets its products to
customers in the North America, Europe and Asia.

<TABLE>
<CAPTION>
                                          Three Months Ended
                                             December 31,
                                          ------------------
                                           2000        1999
                                          ------      ------
<S>                                       <C>         <C>
Revenue from Unaffiliated Customers:
  Taiwan ...........................      $2,116      $1,788
  Japan ............................       1,985       1,133
  United States ....................         593         729
  Singapore ........................          51         645
  Other ............................         809         766
                                          ------      ------
                                          $5,554      $5,061
                                          ======      ======
</TABLE>



                                        8
<PAGE>   9

                            ARTISAN COMPONENTS, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
                                   (Unaudited)

7. SUBSEQUENT EVENT:

On January 4, 2001, the Company completed the acquisition of certain assets of
the physical library business of Synopsys, Inc. As consideration for the
acquired physical library assets, the Company paid $13,354,131 in cash and
issued 1,450,000 shares of its common stock to Synopsys, Inc. This transaction
will be accounted for under the purchase method of accounting.

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

The following discussion should be read in conjunction with the Unaudited
Condensed Consolidated Interim Financial Statements and the Notes thereto
included elsewhere herein and the audited consolidated financial statements
contained in the Company's Annual Report on Form 10-K for the year ended
September 30, 2000 as filed with the Securities and Exchange Commission. The
following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The forward-looking statements
contained herein are based on current expectations and entail various risks and
uncertainties that could cause actual results to differ materially from those
expressed in such forward-looking statements. Forward looking statements can
often be identified by the use of forward looking words such as "may," "will,"
"could," "should," "expect," "believe," "anticipate," "estimate," "continue,"
"plan," "intend," "project," or other similar words. For a more detailed
discussion of these and other business risks, see "--Factors Affecting Future
Operating Results."

OVERVIEW

Artisan Components, Inc. ("Artisan" or the "Company") is a leading developer of
high performance, high density and low power embedded memory, standard cell and
input/output ("I/O") intellectual property ("IP") components for the design and
manufacture of complex integrated circuits ("ICs"). The Company licenses its
products to semiconductor manufacturers and fabless semiconductor companies for
the design of ICs used in complex, high volume applications, such as portable
computing devices, cellular phones, consumer multimedia products, automotive
electronics, personal computers and workstations. Looking forward, the Company
expects to see continued strength and growth in its market segments,
particularly the communication networking and consumer sectors.

Beginning in late fiscal 1996, the Company implemented a royalty-based business
model that is intended to generate revenue from both license fees and royalties.
The Company generally licenses its products on a nonexclusive, worldwide basis
to major semiconductor manufacturers and grants these manufacturers the right to
distribute the Company's IP components to their internal design teams and to
distribute and sublicense the Company's IP components to semiconductor design
companies that manufacture at the same facility. In cases where the
semiconductor manufacturer does not have the infrastructure necessary to
distribute and support the Company's IP components, the Company performs the
distribution function directly to the customers of the semiconductor
manufacturer. License fees and royalties are received under the terms of license



                                        9
<PAGE>   10

agreements with customers to provide the Company's IP component products.
Typically, a customer licenses one or more products that are accompanied by
layout databases, views to support a customer's IC design tool environment and
design methodology documentation. The license of the Company's products
typically involves a sales cycle of six to 12 months and often coincides with a
customer's migration to a new manufacturing process. The Company's contracts
generally require a customer to pay a license fee to Artisan ranging from
approximately $250,000 to $700,000 for each product delivered under a contract.
The Company's contracts generally require a customer to pay a portion of the
license fees upon signing of the contract with the final payment due within 30
to 60 days after the completion of customization, which generally takes three to
six months. Royalty payments are calculated based on per unit sales of ICs or
wafers containing the Company's IP components. Given that the Company provides
its products early in the customer's IC design process, there is a significant
delay between the delivery of a product and the generation of royalty revenue.

To date, the substantial majority of the Company's license revenue has been
recognized using the percentage of completion method of accounting. Provisions
for estimated losses on uncompleted contracts are recognized in the period in
which such losses are determined to be likely. As the completion period for a
project ranges from three to six months, revenue in any quarter is dependent on
the Company's progress toward completion of the project. There can be no
assurance that the Company's estimates will be accurate, and, in the event they
are not, the Company's business, operating results and financial condition in
subsequent periods could be materially adversely affected. See "--Factors
Affecting Future Operating Results--Lengthy Sales Cycle and Design Process."

The Company has received royalty reports from five of its customers. Net royalty
revenue was 20% and 12% of total revenue in the three month period ended
December 31, 2000 and 1999, respectively. According to contract terms, a portion
of each royalty payment is credited back to the customer's account for use as
payment of license fees for future orders placed with the Company. The remaining
portion of the royalty is reported as net royalty revenue. The amount of credit
back that can be earned by a customer is limited to the cumulative amount of
orders placed by that customer for a given process technology. The Company's
success will depend, in part, on its ability to generate royalty revenue from a
substantially larger number of designs and on many of these designs achieving
large manufacturing volumes. See "--Factors Affecting Future Operating
Results--Fluctuations in Operating Results--Dependence on License Fee- and
Royalty-Based Business Model."

The Company has been dependent on a relatively small number of customers for a
substantial portion of its revenue, although the customers comprising this group
have changed from time to time. In the three month period ended December 31,
2000, Taiwan Semiconductor Manufacturing Corporation ("TSMC") and Sharp
Corporation ("Sharp") accounted for 35% and 11% of total revenue, respectively.
In the three month period ended December 31, 1999, TSMC, NEC Electronics, Inc.
("NEC"), Chartered Semiconductor Manufacturing ("Chartered") and UMC Group
("UMC") accounted for 25%, 15%, 13% and 11% of revenue, respectively. The
Company anticipates that its revenue will continue to depend on a limited number
of major customers for the foreseeable future, although the companies considered
to be major customers and the percentage of revenue represented by each major
customer may vary from period to period depending on the addition of new
contracts and the number of designs utilizing the Company's products. See
"--Factors Affecting Future Operating Results--Customer Concentration; Limited
Customer Base."



                                       10
<PAGE>   11

Historically, a substantial portion of the Company's revenue has been derived
from customers outside the United States, primarily from Asia and Europe
("international revenue"). In the three month periods ended December 31, 2000
and 1999, international revenue represented approximately 89% and 86%,
respectively, of the Company's total revenue. The Company anticipates that
international revenue will remain a substantial portion of its revenue in the
future. To date, all of the revenue from international customers has been
denominated in U.S. dollars. See "--Factors Affecting Future Operating
Results--Risks Associated with International Customers."

While net royalty revenue accounted for 20% of total revenue in the three month
period ended December 31, 2000, the Company derives a substantial majority of
all of its revenue from license fees associated with products, including support
and maintenance, that together accounted for 80% and 88% of total revenue in the
three month period ended December 31, 2000 and 1999, respectively. Although the
percent of revenue represented by license revenue has declined, the Company
expects that license revenue will continue to account for a substantial portion
of the Company's revenue for the foreseeable future. See "--Results of
Operations" and "--Factors Affecting Future Operating Results--Product
Concentration"."

On December 4, 2000, the Company entered into a definitive agreement to acquire
certain assets of the physical library business of Synopsys, Inc. ("Physical
Library Business") and completed the acquisition on January 4, 2001. The
acquisition is expected to increase both the Company's revenue and expenses. The
increase in revenue will result from the expansion of the Company's portfolio of
products and patents and the expected increase in its product development and
delivery capacity. Engineering costs are expected to increase in particular, as
the majority of the personnel joining the Company from the Physical Library
Business are engineers. Sales and marketing expenses and general and
administrative expenses are also expected to increase to support the newly
acquired business. There may be a delay between the initial increase in
engineering costs and other expenses and the increase in revenue as the Company
attempts to integrate the Physical Library Business into its existing business.
See "--Factors Affecting Future Operating Results -- Risks Associated with the
Acquisition of Certain Assets of the Physical Library Business of Synopsys,
Inc."

Since the Company's inception in April 1991, each of the Company's cost and
expense categories has increased as the Company has added personnel and
increased its activities in most areas. The Company intends to continue making
significant expenditures, particularly those associated with engineering and
sales and marketing, and expects that these costs and expenses will continue to
be a large percentage of total revenue in future periods.

In connection with the grant of options for the purchase of 96,200 shares of
Common Stock to employees during the period from December 1996 through March
1997 and 15,000 shares of Common Stock to non-employees in January 1998, the
Company recorded aggregate deferred compensation of approximately $281,000,
representing the difference between the deemed fair value of the Common Stock



                                       11
<PAGE>   12

and the option exercise price at the date of grant. Such deferred compensation
is amortized over the vesting period relating to the options. As of December 31,
2000, such deferred compensation has been fully amortized.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, selected statements
of operations data as a percentage of revenue:

<TABLE>
<CAPTION>
                                                Three Months Ended
                                                  December 31,
                                                ------------------
                                                 2000        1999
                                                -----       -----
<S>                                             <C>         <C>
Revenue:
  License ..............................         80.3%       87.8%
  Net royalty ..........................         19.7        12.2
                                                -----       -----
    Total revenue ......................        100.0       100.0
                                                -----       -----
Cost and expenses:
  Cost of revenue ......................         18.4        28.7
  Product development ..................         41.0        32.4
  Sales and marketing ..................         25.7        33.1
  General and administrative ...........         12.0        10.7
                                                -----       -----
    Total cost and expenses ............         97.1       104.9
                                                -----       -----
Operating income/(loss) ................          2.9        (4.9)
Other income, net ......................         16.2        13.5
                                                -----       -----
Income before provision for income
 taxes..................................         19.1         8.6
Provision for income taxes .............          6.5         2.8
                                                -----       -----
Net income .............................         12.6%        5.8%
                                                =====       =====
</TABLE>

REVENUE

<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                        December 31,
                                                -----------------------------
($ In Thousands)                                 2000       Inc/(Dec)   1999
                                                ------      ---------  ------
<S>                                             <C>         <C>        <C>
License ................................        $4,462         0.4%    $4,445
Net royalty ............................         1,092        77.3%       616
                                                ------                 ------
   Total revenue .......................        $5,554         9.7%    $5,061
                                                ======                 ======
</TABLE>

Total revenue increased by 9.7% in the first quarter of fiscal 2001, compared to
the first quarter of fiscal 2000. The increase in total revenue was due to
higher net royalty revenue and revenue from support contracts, offset by lower
license revenue, excluding support revenue. Gross royalty payments are
calculated based on per unit sales of ICs or wafers containing the Company's IP
components. Total gross royalties for the first quarters of fiscal 2001 and 2000
were $1.6 million and $946,000, respectively. From gross royalties, a portion
was credited back to the customer's account for use as payment of license fees
for future orders to be placed with the Company. The remaining portion of the
gross royalty was reported as net royalty revenue.



                                       12
<PAGE>   13

COSTS AND EXPENSES

<TABLE>
<CAPTION>
                                     Three Months Ended
                                        December 31,
                              ------------------------------
($ In Thousands)               2000      Inc/(Dec)     1999
                              ------     --------     ------
<S>                           <C>        <C>          <C>
Cost of revenue ........      $1,021       (29.8)%    $1,454
Product development ....       2,279        38.8%      1,642
                              ------                  ------
   Engineering costs ...      $3,300         6.6%     $3,096
                              ======                  ======
</TABLE>

Engineering costs are allocated between cost of revenue and product development
expenses. Engineering efforts devoted to developing products for specific
customer projects are recognized as cost of revenue. The balance of engineering
costs, incurred for general development of Artisan's technology, is charged to
product development. Engineering costs generally are expensed as incurred.
Engineering costs increased by 6.6% in the first quarter of fiscal 2001,
compared to the first quarter of fiscal 2000. The absolute dollar increase in
engineering costs of $204,000 in the first quarter of fiscal 2001, as compared
with the same period in fiscal 2000, was primarily due to increased headcount
and personnel expenses of approximately $499,000, decreased computer and
networking equipment maintenance and depreciation of approximately $156,000,
decreased warranty expense of $73,000 and by an overall decrease in the use of
contractors and outside services of $66,000.

    Cost of revenue decreased by 29.8% in the first quarter of fiscal 2001,
    compared to the first quarter of fiscal 2000. The absolute dollar decrease
    in cost of license revenue of $433,000 in the first quarter fiscal 2001, as
    compared with the same period in fiscal 2000, was due to decreased use of
    outside contractors of $164,000, lower warranty expense of $73,000 and fewer
    engineering hours allocated to revenue-generating projects in the first
    quarter of fiscal 2001 of $196,000. Cost of revenue as a percent of license
    revenue decreased from 32.7% in the first quarter of fiscal 2000 to 22.9% in
    the first quarter of fiscal 2001. This decrease is due to the decrease in
    cost of revenue explained above.

    Product development expenses increased by 38.8% in the first quarter of
    fiscal 2001, compared to the first quarter of fiscal 2000. The absolute
    dollar increase in product development of $637,000 in the first quarter
    fiscal 2001, as compared with the same period in fiscal 2000, was due to
    increased headcount and personnel-related expenses of $499,000, increased
    use of contractors $98,000 and fewer engineering hours allocated to
    revenue-generating projects of $196,000 offset by decreased computer and
    networking equipment maintenance and depreciation of $156,000. The Company
    expects that product development expenses will continue to increase in
    absolute dollars.

<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                           December 31,
                                                   --------------------------
($ In Thousands)                                     2000   Inc/(Dec)   1999
                                                   -------  --------  -------
<S>                                                <C>      <C>       <C>
Sales and marketing expenses.....................  $ 1,426   (14.8)%  $ 1,673
                                                   =======            =======
</TABLE>

Sales and marketing expenses include salaries, commissions, travel expenses and
costs associated with trade shows, advertising and other marketing efforts.
Sales and marketing expenses decreased by 14.8% in the first quarter of fiscal
2001, compared to the first quarter of fiscal 2000. The decrease in absolute
dollars in sales and marketing expenses of $247,000 in the first quarter of
fiscal 2001, as compared with the first quarter of fiscal 2000, was attributable



                                       13
<PAGE>   14

to decreased headcount and personnel-related expenses of approximately $198,000
and lower other expenses of $49,000. Headcount and personnel-related costs and
travel costs decreased due to fewer sales personnel employed with the Company in
the first quarter of fiscal 2001, as compared with the first quarter of fiscal
2000. Marketing program expenses increased due to increased advertising and
marketing collateral expenses.

<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                           December 31,
                                                   --------------------------
($ In Thousands)                                     2000   Inc/(Dec)   1999
                                                   -------  --------  -------
<S>                                                <C>      <C>       <C>
General and administrative expenses..............  $   669    23.9%   $   540
                                                   =======            =======
</TABLE>

General and administrative expenses increased by 23.9% in the first quarter of
fiscal 2001 as compared to the first quarter of fiscal 2000. The absolute dollar
increase in general and administrative expenses of $129,000 in the first quarter
of fiscal 2001, as compared with the first quarter of fiscal 2000, was due to
increased headcount and personnel-related expenses. The Company expects general
and administrative expenses to grow in absolute dollars in future periods as the
Company expands its operations.

OTHER INCOME

<TABLE>
<CAPTION>
                                                       Three Months Ended
                                                           December 31,
                                                   --------------------------
($ In Thousands)                                     2000   Inc/(Dec)   1999
                                                   -------  --------  -------
<S>                                                <C>      <C>       <C>
Other income, net................................  $   900    31.6%   $   684
                                                   =======            =======
</TABLE>

Other income increased by 31.6% in the first quarter of fiscal 2001. The growth
in other income of $216,000 in the first quarter of fiscal 2001, as compared
with the first quarter of fiscal 2000, reflected a higher rate of return on the
Company's investment portfolio.

INCOME TAXES

<TABLE>
<CAPTION>
                                                       Three Months Ended
                                                           December 31,
                                                   --------------------------
($ In Thousands)                                     2000   Inc/(Dec)   1999
                                                   -------  --------  -------
<S>                                                <C>      <C>       <C>
Provision for income taxes.......................  $   360     N/A    $   144
                                                   =======            =======
</TABLE>

The effective tax rates were 34% and 33% in the first quarter of fiscal 2001 and
2000, respectively. The increase in the effective tax rate was due to a lower
ratio of research and development credits and tax-free interest income to
taxable income.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations primarily from license revenue received
from inception to December 31, 2000, the net proceeds of $27.1 million from its
February 1998 initial public offering of Common Stock, the net proceeds of $15.8
million from its April 1998 secondary offering of Common Stock and, to a lesser
extent, the proceeds of approximately $7.7 million from the sale of Preferred
Stock and a warrant.

Net cash used in operating activities was $1.1 million and $1.4 million in the
first quarter of fiscal 2001 and 2000, respectively. Net cash used by operating
activities in the first quarter of fiscal 2001 was primarily due to an increase



                                       14
<PAGE>   15

in contract receivables and prepaid expenses and a decrease in deferred revenue
offset by depreciation and an increase in accounts payable. Net cash used in
operating activities in the first quarter of fiscal 2000 was primarily due to an
increase in contract receivables and prepaid expenses and a decrease in accounts
payable offset by depreciation and an increase in deferred revenue.

Net cash provided by investing activities was $1.4 million in the first quarter
of fiscal 2001. Net cash used in investing activities was $3.0 million in the
first quarter of fiscal 2000. The investing activities consisted primarily of
net sales and purchases of marketable securities.

Net cash provided by financing activities was $285,000 and $669,000 in the first
quarter of fiscal 2001 and 2000, respectively. Net cash provided by financing
activities in both periods consisted of proceeds from the issuance of Common
Stock to employees upon the exercise of stock options.

At December 31, 2000, the Company had cash, cash equivalents and current
marketable securities of $53.1 million. As of December 31, 2000, the Company had
retained earnings of $4.5 million and working capital of $58.5 million.

The Company intends to continue to invest heavily in the development of new
products and enhancements to its existing products. The Company's future
liquidity and capital requirements will depend upon numerous factors, including
the costs and timing of expansion of product development efforts and the success
of these development efforts, the costs and timing of expansion of sales and
marketing activities, the extent to which the Company's existing and new
products gain market acceptance, competing technological and market
developments, the costs involved in maintaining and enforcing patent claims and
other intellectual property rights, the level and timing of license and royalty
revenue, available borrowings under line of credit arrangements and other
factors. The Company believes that its current cash and investment balances and
any cash generated from operations and from available or future debt financing
will be sufficient to meet the Company's operating and capital requirements for
at least the next 12 months. However, from time to time, the Company may be
required to raise additional funds through public or private financing,
strategic relationships or other arrangements. There can be no assurance that
such funding, if needed, will be available on terms attractive to the Company,
or at all. Furthermore, any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may involve restrictive
covenants. Strategic arrangements, if necessary to raise additional funds, may
require the Company to relinquish its rights to certain of its technologies or
products. The failure of the Company to raise capital when needed could have a
material adverse effect on the Company's business, operating results and
financial condition. See "-Factors Affecting Future Operating Results-Future
Capital Needs; Uncertainty of Additional Funding."

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Investments and Hedging Activities." The
statement establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement also requires that changes
in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. The adoption of SFAS No. 133 on
October 1, 2000 did not have a material effect on the Company's financial
position or results of operations.



                                       15
<PAGE>   16

In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"),
"Revenue Recognition in Financial Statements." SAB 101 provides guidance on
applying GAAP to revenue recognition issues in financial statements. The
adoption of SAB 101 on October 1, 2000 did not have a material effect on the
Company's financial position or results of operations.

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation -- an Interpretation of APB Opinion
No. 25" ("FIN 44"). This Interpretation clarifies the definition of employee for
purposes of applying Accounting Practice Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"), the criteria for determining whether a
plan qualifies as a noncompensatory plan, the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and the
accounting for an exchange of stock compensation awards in a business
combination. The Interpretation is effective July 1, 2000, but certain
conclusions in this Interpretation cover specific events that occur after either
December 15, 1998 or January 12, 2000. To the extent that FIN 44 covers events
occurring during the period after December 15, 1998 or January 12, 2000, but
before the effective date of July 1, 2000, the effects of applying this
Interpretation are recognized on a prospective basis from July 1, 2000. The
adoption of FIN 44 did not have a material effect on the Company's financial
position or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to the impact of interest rate changes and changes in the
market values of its investments.

Interest Rate Risk

The Company's exposure to market risk for changes in interest rates relate
primarily to the Company's investment portfolio. The Company has not used
derivative financial instruments in its investment portfolio. The Company
invests its excess cash in high-quality corporate issuers and in debt
instruments of the U.S. Government and, by policy, limits the amount of credit
exposure to any one issuer. As stated in its policy, the Company is averse to
principal loss and seeks to preserve its invested funds by limiting default
risk, market risk and reinvestment risk. The Company mitigates default risk by
investing in high credit quality securities and by positioning its portfolio to
respond appropriately to a significant reduction in a credit rating of any
investment issuer or guarantor. The portfolio includes only marketable
securities with active secondary or resale markets to ensure portfolio
liquidity.

Investments in both fixed 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 rising 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 or the Company may suffer losses
in principal if forced to sell securities which have declined in market value
due to changes in interest rates.



                                       16
<PAGE>   17

The table below presents the carrying value and related weighted average
interest rates for the Company's investment portfolio. The carrying values
approximate fair values at December 31, 2000 and September 30, 2000. All
investments mature in one year or less.

<TABLE>
<CAPTION>
                                CARRYING      AVERAGE RATE    CARRYING       AVERAGE RATE
                                VALUE AT      OF RETURN AT    VALUE AT       OF RETURN AT
                               DECEMBER 31,   DECEMBER 31,  SEPTEMBER 30,    SEPTEMBER 30,
                                    2000          2000           2000          2000
                              --------------  ------------  --------------   ------------
                              (IN THOUSANDS)  (ANNUALIZED)  (IN THOUSANDS)   (ANNUALIZED)
<S>                           <C>             <C>           <C>              <C>
INVESTMENT SECURITIES:

Cash Equivalents -
         variable rate .          $ 2,746           6.2%         $ 4,544          5.8%
Money market funds -
         variable rate .            4,118           6.4%             618          6.3%
Cash Equivalents -
         fixed rate ....           27,030           6.6%          28,116          6.6%
Short-term investments -
         fixed rate ....           19,225           6.6%          20,738          6.7%
                                  -------                        -------
Total ..................          $53,119                        $54,016
                                  =======                        =======
</TABLE>

FACTORS AFFECTING FUTURE OPERATING RESULTS

Fluctuations in Operating Results

The Company's operating results have fluctuated in the past as a result of a
number of factors including the relatively large size and small number of
customer orders during a given period; the timing of customer orders; delays in
the design process due to changes by a customer to its order after it is placed;
the Company's ability to achieve progress on percentage of completion contracts;
the length of the Company's sales cycle; the Company's ability to develop,
introduce and market new products and product enhancements; the timing of new
product announcements and introductions by the Company and its competitors;
market acceptance of the Company's products; the demand for semiconductors and
end-user products that incorporate semiconductors and general economic
conditions. The Company's future operating results may fluctuate from quarter to
quarter and on an annual basis as a result of these and other factors, in
particular the relatively large size and small number of customer orders during
a given period and the amount of royalties recognized in a given period.
Accordingly, it is likely that in some future quarter the Company's operating
results will be below the expectations of public market analysts and investors.
In that event, the price of the Company's Common Stock would likely decline,
perhaps substantially.

The limited number of semiconductor manufacturers to which the Company can
license its products may also have a material adverse effect on the Company's
business, operating results and financial condition if any of the Company's
customers suffers a deterioration in financial condition or there is a decline
in the demand for the semiconductors produced by such manufacturers. The
Company's business, operating results and financial condition may also be
materially adversely affected if customers experience project delays and/or new
or existing customers delay new bookings or fail to place anticipated orders.

Revenue in any quarter is dependent on a number of factors and is not
predictable with any degree of certainty. Since the Company's expense levels are
based in part on management's expectations regarding future revenue, if revenue
is below expectations in any quarter, the adverse effect may be magnified by the
Company's inability to adjust spending in a timely manner to



                                       17
<PAGE>   18

compensate for any revenue shortfall. Accordingly, if the Company does not
realize its expected revenue, its business, operating results and financial
condition could be materially adversely affected. The Company intends to
continue its investment in research and development as well as in product
promotion, licensing and support programs in an effort to maximize the growth of
future royalties.

The Company's sales cycle can be lengthy and is subject to a number of risks
over which the Company has little or no control. As a result of the significant
dollar amounts represented by a single customer order, the timing of the receipt
of an order can have a significant impact on the Company's revenue for a
particular period. In addition, because the Company's revenue is concentrated
among a small number of customers, a decline or a delay in the recognition of
revenue from one customer in a period may cause the Company's business,
operating results and financial condition in such period to be materially
adversely affected and may lead to significant fluctuations from quarter to
quarter. Any significant or ongoing failure to obtain new orders from customers
or to collect outstanding accounts receivable would have a material adverse
effect on the Company's business, operating results and financial condition. The
Company has, in the past, experienced periods of negative growth as well as
declines in the rate of growth of its revenue as compared with prior periods.
There can be no assurance that the Company will experience stable or increasing
revenues in the future.

To date, a substantial majority of the Company's license revenue has been
recognized on a percentage of completion method of accounting. Provisions for
estimated losses on the uncompleted contracts are recognized in the period in
which such losses are determined to be likely. As the completion period ranges
from three to six months, revenue in any quarter is dependent on the Company's
progress toward completion of the project. There can be no assurance that the
Company's estimates will be accurate, and, in the event they are not, the
Company's business, operating results and financial condition in subsequent
periods could be materially adversely affected. From time to time, the Company
experiences delays in the progress of certain projects, and there can be no
assurance that such delays will not occur in the future. Any delay or failure to
achieve progress could result in damage to customer relationships and the
Company's reputation, under-utilization of engineering resources or a delay in
the market acceptance of the Company's products, any of which could have a
material adverse effect on the Company's business, operating results and
financial condition. See "--Results of Operations."

Dependence on License Fee- and Royalty-Based Business Model

The Company has historically generated revenue from license fees only. Beginning
in late fiscal 1996, the Company implemented a business model that is intended
to generate revenue from both license fees and royalties. The Company generally
licenses its products on a nonexclusive, worldwide basis to major semiconductor
manufacturers and grants these manufacturers the right to distribute the
Company's IP components to their internal design teams and to distribute and
sublicense to semiconductor design companies that manufacture at the same
facility. In cases where the semiconductor manufacturer does not have the
infrastructure necessary to distribute and support the Company's IP components,
the Company performs the distribution function directly to the customers of the
semiconductor manufacturer. Given that the Company provides its products early
in the customer's IC design process, there is a significant



                                       18
<PAGE>   19

delay between the delivery of a product and the generation of royalty revenue.
Royalty payments are calculated based on per unit sales of ICs or wafers
containing the Company's IP. A portion of these payments is credited back to the
customer's account for use as payment of license fees for future orders to be
placed with the Company. The remaining portion of the royalty is reported as net
royalty revenue. In the third quarter of fiscal 1999, the Company received its
first royalty revenue. The Company's success will depend, in part, on its
ability to generate royalty revenue from a substantially larger number of
designs and on many of these designs achieving large manufacturing volumes. The
Company's ability to generate such royalty revenue will in turn depend in part
on its ability to negotiate, structure, monitor and enforce agreements for the
determination and payment of royalties. There can be no assurance that the
Company will be successful in expanding the number of royalty bearing contracts
with customers, and there can be no assurance that the Company will receive
significant royalty revenue in the future. See "--Dependence on Semiconductor
Manufacturers; Dependence on Semiconductor and Electronics Industries" and
"--Customer Concentration; Limited Customer Base."

The Company believes that its long-term success will be substantially dependent
on future royalties. In addition, the Company will face risks inherent in a
royalty-based business model. In particular, the Company's ability to forecast
royalty revenue will be limited by factors that are beyond the Company's ability
to control or assess in advance. Royalties will be recognized in the quarter in
which the Company receives a royalty report from its customers and will be
dependent upon fluctuating sales volumes. In addition, under the royalty-based
business model, the Company's revenue will be dependent upon the sales by its
customers of products that incorporate the Company's technology. Even if the
Company's technology is adopted, there can be no assurance that it will be used
in a product that is ultimately brought to market, achieves commercial
acceptance or results in significant royalties to the Company.

The Company also faces risks relating to the accuracy and completeness of the
royalty collection process. The Company has no experience or systems in place to
conduct reviews of the accuracy of the royalty reports it receives from its
licensees. The Company has the right to audit its licensees' records to ensure
the integrity of their royalty reporting systems; however, such audits may only
be conducted periodically and are at the Company's cost. The Company does not
have internal systems or staff dedicated to monitoring the royalty obligations
of its customers, and if it were to implement such systems and hire such staff
in the short term, the costs of those systems and staff could largely offset the
revenue the Company receives in the form of royalties. See "--Results of
Operations."

Dependence on Emergence of Merchant IP Component Market and Broad Market
Acceptance of the Company's Products

The market for merchant IP components has only recently emerged. The Company's
ability to achieve sustained revenue growth and profitability in the future will
depend on the continued development of this market and, to a large extent, on
the demand for System-on-a-Chip ICs. System-on-a-Chip ICs are characterized by
rapid technological change and competition from an increasing number of
alternate design strategies such as multi-chip system-on-package and chip size
packaging designs. There can be no assurance that the merchant IP component and
System-on-a-Chip markets will continue to develop or grow at a rate sufficient
to support the Company's business. If either of these markets fails to grow or
develops slower than expected, the Company's business, operating results and



                                       19
<PAGE>   20

financial condition would be materially adversely affected. To date, the
Company's IP products have been licensed only by a limited number of customers.
The vast majority of the Company's existing and potential customers currently
rely on components developed internally and/or by other vendors. The Company's
future growth, if any, is dependent on the adoption of, and increased reliance
on, merchant IP components by both existing and potential customers. Moreover,
if the Company's products do not achieve broad market acceptance, the Company's
business, operating results and financial condition would be materially
adversely affected.

Competition

The Company's strategy of targeting semiconductor manufacturers that participate
in, or may enter, the System-on-a-Chip market requires the Company to compete in
intensely competitive markets. Within the merchant segment of the IP component
market, the Company primarily competes against Avant! Corporation, Nurlogic
Corporation, Virage Logic Corporation and Virtual Silicon Technology. In
addition, the Company may face competition from consulting firms and companies
that typically have operated in the generic library segment of the IP market and
that now seek to offer customized IP components as enhancements to their generic
solutions. The Company also faces significant competition from the internal
design groups of semiconductor manufacturers that are expanding their
manufacturing capabilities and portfolio of IP components to participate in the
System-on-a-Chip market. These internal design groups compete with the Company
for access to the parent's IP component requisitions and may eventually compete
with the Company to supply IP components to third parties on a merchant basis.
There can be no assurance that internal design groups will not expand their
product offerings to compete directly with those of the Company or will not
actively seek to participate as merchant vendors in the IP component market by
selling to third party semiconductor manufacturers or, if they do, that the
Company will be able to compete against them successfully. In addition to
competition from companies in the merchant IP component market, the Company
faces competition from vendors that supply EDA software tools, including certain
of those mentioned above, and there can be no assurance that the Company will be
able to compete successfully against them.

The Company expects competition to increase in the future from existing
competitors and from new market entrants with products that may be less
expensive than the Company's IP components or that may provide better
performance or additional features not currently provided by the Company. Many
of the Company's current and potential competitors have substantially greater
financial, technical, manufacturing, marketing, distribution and other
resources, greater name recognition and market presence, longer operating
histories, lower cost structures and larger customer bases than the Company. As
a result, they may be able to adapt more quickly to new or emerging technologies
and changes in customer requirements. In addition, certain of the Company's
principal competitors offer a single vendor solution, since, in the case of EDA
tool companies, they maintain their own EDA design tools and IP libraries or, in
the case of internal design groups, they provide IP components developed to
utilize the qualities of a given manufacturing process, and may therefore
benefit from certain capacity, cost and technical advantages. The Company's
ability to compete successfully in the emerging market for IP components will
depend upon certain factors, many of which are beyond the Company's control
including, but not limited to, success in designing new products; implementing
new designs at smaller process geometries; access to adequate EDA tools (many of
which are licensed from the Company's current or potential competitors); the
price, quality and timing of new product introductions by the Company and its



                                       20
<PAGE>   21

competitors; the emergence of new IP component interchangeability standards; the
widespread licensing of IP components by semiconductor manufacturers or their
design groups to third party manufacturers; the ability of the Company to
protect its intellectual property; market acceptance of the Company's IP
components; success of competitive products; market acceptance of products using
System-on-a-Chip ICs and industry and general economic conditions. There can be
no assurance that the Company will be able to compete successfully in the
emerging merchant IP component market.

Dependence on Semiconductor Manufacturers; Dependence on Semiconductor and
Electronics Industries

The Company's success is substantially dependent both on the adoption of the
Company's technology by semiconductor manufacturers and on an increasing demand
for products requiring complex System-on-a-Chip ICs, such as portable computing
devices, cellular phones, consumer multimedia products, automotive electronics,
personal computers and workstations. The Company is subject to many risks beyond
its control that influence the success of its customers including, among others,
competition faced by each customer in its particular industry, market acceptance
of the customer's products that incorporate the Company's technology, the
engineering, sales and marketing capabilities of the customer and the financial
and other resources of the customer. Demand for the Company's products may also
be affected by mergers in the semiconductor and systems industries, which may
reduce the aggregate level of purchases of the Company's products and services
by the combined companies. Faltering growth in the semiconductor and systems
industries, a reduced number of designs starts, shifts in the types of
integrated circuits manufactured, tightening of customers' operating budgets or
consolidation among the Company's customers could have a material adverse effect
on the Company's business, financial condition and results of operations.

The semiconductor and electronics products industries are characterized by rapid
technological change, frequent introductions of new products, short product life
cycles, fluctuations in manufacturing capacity and pricing and gross margin
pressures. Each of these industries is highly cyclical and has periodically
experienced significant downturns, often in connection with or in anticipation
of decline in general economic conditions during which the number of new IC
design projects often decreases. Revenue from licenses of the Company's products
is influenced by the level of design efforts by its customers, and factors
negatively affecting these industries could have a material adverse effect on
the Company's business, operating results and financial condition. The Company's
business, operating results and financial condition may fluctuate in the future
from period to period as a consequence of general economic conditions in the
semiconductor and electronics industries.

Customer Concentration; Limited Customer Base

The Company has been dependent on a relatively small number of customers for a
substantial portion of its revenue, although the customers comprising this group
have changed from time to time. In the three month period ended December 31,
2000, TSMC and Sharp accounted for 35% and 11% of total revenue, respectively.
In the three month period ended December 31, 1999, TSMC, NEC, Chartered and UMC
accounted for 25%, 15%, 13% and 11% of revenue, respectively. The Company
anticipates that its revenue will continue to depend on a limited number of
major customers for the foreseeable future, although the companies considered to
be major customers and the percentage of revenue represented by each major



                                       21
<PAGE>   22

customer may vary from period to period depending on the addition of new
contracts and the number of designs utilizing the Company's products.

None of the Company's customers has a written agreement with the Company that
obligates it to license future generations of products or new products, and
there can be no assurance that any customer will license IP components from the
Company in the future. In addition, there can be no assurance that any of the
Company's customers will ship products incorporating the Company's technology or
that, if such shipments occur, they will generate significant revenue. The loss
of one or more of the Company's major customers, reduced orders by one or more
of such customers, the failure of one or more customers to pay license or
royalty fees due to the Company or the failure of a customer to ship products
containing the Company's IP components could materially adversely affect the
Company's business, operating results and financial condition. The Company's
business, operating results and financial condition may also be materially
adversely affected if customers experience project delays and/or new or existing
customers delay new bookings or fail to place anticipated orders.

The Company faces numerous risks in successfully obtaining orders from customers
on terms consistent with the Company's business model, including, among others,
the lengthy and expensive process of building a relationship with a potential
customer before reaching an agreement with such party to license the Company's
products; persuading large semiconductor manufacturers to work with, to rely for
critical technology on, and to disclose proprietary information to a smaller
company, such as the Company, and persuading potential customers to bear certain
development costs associated with development of customized components. There
are a relatively limited number of semiconductor manufacturers to which the
Company can license its technology in a manner consistent with its business
model and there can be no assurance that such manufacturers will rely on
merchant IP components or adopt the Company's products. See "--Competition."

Product Concentration

While net royalty revenue accounted for 20% of total revenue in the three month
period ended December 31, 2000, the Company derives a substantial majority of
all of its revenue from license fees associated with the sales of its products,
including support and maintenance, that together accounted for 80% and 88% of
total revenue in the three month period ended December 31, 2000 and 1999,
respectively. Although the percent of revenue represented by license revenue has
declined, the Company expects that license revenue will continue to account for
a substantial portion of the Company's revenue for the foreseeable future. There
can be no assurance that the Company will continue to derive revenue from
license revenue and a decline in license revenue would have a material adverse
effect on the Company's business, operating results and financial condition. The
Company's future financial performance will depend in significant part on the
successful development, introduction and customer acceptance of new products.

Lengthy Sales Cycle and Design Process

The license of the Company's products typically involves a significant
commitment of capital by the customer and a purchase will often be timed to
coincide with a customer's migration to a new manufacturing process. Potential
customers generally commit significant resources to an evaluation of available
IP solutions and require the Company to expend substantial time, effort and
resources to educate them about the value of the Company's products. A variety



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of factors, including factors over which the Company has little or no control,
may cause potential customers to favor an alternate solution or to delay or
forego a license of the Company's products. As a result of these and other
factors, the sales cycle for the Company's products is long, typically ranging
from six to 12 months. The Company's ability to forecast the timing and scope of
specific sales is limited, and delay of or failure to complete one or more large
contracts could have a material adverse effect on the Company's business,
operating results and financial condition and could cause the Company's
operating results to fluctuate significantly from quarter to quarter.

Once the Company receives and accepts an order from a customer, the Company must
commit significant resources to customizing its products for the customer's
manufacturing process. This customization is complex and time consuming and is
subject to a number of risks over which the Company has little or no control,
including the customer's adjustments and alterations of its manufacturing
process or the timing of migration to a new process. Typically, this
customization takes from three to six months to complete. Delays in product
customization could have a material adverse effect on the Company's business,
operating results and financial condition and could cause the Company's
operating results to vary significantly from quarter to quarter.

Risks Associated with International Customers

Historically, a substantial portion of the Company's revenue has been
international revenue. In the three month period ended December 31, 2000 and
1999, international revenue represented approximately 89% and 86%, respectively,
of the Company's total revenue. The Company anticipates that international
revenue will remain a substantial portion of its revenue in the future. To date,
all of the revenue from international customers has been denominated in U.S.
dollars. In the event that the Company's competitors denominate their sales in a
currency that becomes relatively inexpensive in comparison to the U.S. dollar,
the Company may experience fewer orders from international customers whose
business is based primarily on the less expensive currency. There can be no
assurance that present or future dislocations with respect to international
financial markets will not have a material adverse effect on the Company's
business, operating results and financial condition. The Company intends to
continue to expand its sales and marketing activities in Asia and Europe. The
Company's expansion of its international business involves a number of risks
including the impact of possible recessionary environments in economies outside
the United States; political and economic instability; exchange rate
fluctuations; longer accounts receivable collection periods and greater
difficulty in accounts receivable collection; unexpected changes in regulatory
requirements; reduced or limited protection for intellectual property rights;
export license requirements; tariffs and other trade barriers and potentially
adverse tax consequences. There can be no assurance that the Company will be
able to sustain or increase revenue derived from international customers or that
the foregoing factors will not have a material adverse effect on the Company's
business, operating results and financial condition.

New Product Development and Technological Change

The Company's customers compete in the semiconductor industry, which is subject
to rapid technological change, frequent introductions of new products, short
product life cycles, changes in customer demands and requirements and evolving
industry standards. The development of new manufacturing processes, the
introduction of products embodying new technologies and the emergence of new
industry standards can render existing products obsolete and unmarketable.



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Accordingly, the Company's future success will depend on its ability to continue
to enhance its existing products and to develop and introduce new products that
satisfy increasingly sophisticated customer requirements and that keep pace with
new product introductions, emerging manufacturing process technologies and other
technological developments in the semiconductor industry. Any failure by the
Company to anticipate or respond adequately to changes in manufacturing
processes or customer requirements, or any significant delays in product
development or introduction would have a material adverse effect on the
Company's business, operating results and financial condition. There can be no
assurance that the Company will not experience difficulties that could delay or
prevent the successful development, introduction and sale of new or enhanced
products or that such new or enhanced products will achieve market acceptance.
Any delay in release dates of new or enhanced products could materially
adversely affect the Company's business, operating results and financial
condition. The Company could also be exposed to litigation or claims from its
customers in the event that it does not satisfy its delivery commitments. There
can be no assurance that any such claim would not have a material adverse effect
on the Company's business, operating results and financial condition.

Dependence on Key Personnel

The Company's success depends in large part on the continued contributions of
its key management, engineering, sales and marketing personnel, many of whom are
highly skilled and would be difficult to replace. None of the Company's senior
management or key technical personnel is bound by an employment contract. In
addition, the Company does not currently maintain key man life insurance
covering its key personnel. The Company believes that its success depends, to a
significant extent, on the ability of its management to operate effectively,
both individually and as a group. The Company must also attract and retain
highly skilled managerial, engineering, sales, marketing and finance personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be successful in attracting and retaining such personnel. The
loss of the services of any key personnel, the inability to attract or retain
qualified personnel in the future or delays in hiring required personnel,
particularly engineers, could have a material adverse effect on the Company's
business, operating results and financial condition.

Management of Growth

The ability of the Company to license its products and manage its business
successfully in a rapidly evolving market requires an effective planning and
management process. The Company's growth has placed, and is expected to continue
to place, a significant strain on the Company's managerial, operational and
financial resources. From December 31, 1999 to December 31, 2000, the Company
grew from 104 to 110 employees or full-time equivalents. The Company's customers
rely heavily on the Company's technological expertise in designing, testing and
manufacturing products incorporating the Company's IP components. Relationships
with new customers generally require significant engineering support. As a
result, any increase in the demand for the Company's products will increase the
strain on the Company's personnel, particularly its engineers. The Company's
financial and management controls, reporting systems and procedures are also
limited. Although some new controls, systems and procedures have been
implemented, the Company's future growth, if any, will depend on its ability to
continue to implement and improve operational, financial and management
information and control systems on a timely basis, together with maintaining
effective cost controls, and any failure to do so would have a material adverse
effect on the Company's business, operating results and financial condition.



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Further, the Company will be required to manage multiple relationships with
various customers and other third parties and must successfully implement its
royalty business model. There can be no assurance that the Company's systems,
procedures or controls will be adequate to support the Company's operations or
that the Company's management will be able to achieve the rapid execution
necessary to offer its services and products successfully and to implement its
business plan. The Company's inability to manage any future growth effectively
would have a material adverse effect on the Company's business, operating
results and financial condition.

Risks Associated with the Acquisition of Certain Assets of the Physical Library
Business of Synopsys, Inc.

The Company's January 2001 acquisition of certain assets of the Physical Library
Business may reduce the Company's revenue growth rate and make prediction of the
Company's future revenues and operating results more difficult as the Company
integrates the Physical Library Business with its existing business.

The Company expects the strategic and operational integration of the Physical
Library Business into the Company to make prediction of the Company's future
revenues and operating results particularly difficult because the Company's
results of operations in future periods will reflect a substantially different
business than the historical businesses of either the Company or the Physical
Library Business. The Company may not be able to accurately predict how the
combined businesses, or the individual businesses represented by the Company's
intellectual property components and physical library groups, will evolve.
Further, the Company may not be able to accurately predict the possible
impairment of relationships with employees and customers as a result of the
integration of the combined businesses, and the impairment of the goodwill
resulting from the acquisition. The Company may also not be able to accurately
forecast the effect on future operating results from amortization of goodwill
and other intangible assets due to new accounting standards or future policy
changes directed by the Financial Accounting Standard Board or other regulatory
body.

The Company also faces various risks as a result of the acquisition of the
Physical Library Business including, but not limited to, difficulty in combining
the technology, operations or work force of the Physical Library Business;
difficulty in realizing the potential financial or strategic benefits of the
acquisition; substantial unanticipated integration costs; and disruption of the
Company's on-going business.

If the Company's efforts to refocus the Physical Library Business and integrate
it with that of the Company are not successful, the Company's future revenue
growth rates could be substantially less than the Company's historic growth
rates, and the Company's future revenues and operating results could be
adversely affected.

Risks Associated with Protection of Intellectual Property

The Company relies primarily on a combination of nondisclosure agreements and
other contractual provisions and patent, trademark, trade secret and copyright
law to protect its proprietary rights. Failure of the Company to enforce its
patents, trademarks or copyrights or to protect its trade secrets could have a
material adverse effect on the Company's business, operating results and
financial condition. There can be no assurance that such intellectual property



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rights can be successfully asserted in the future or will not be invalidated,
circumvented or challenged. From time to time, third parties, including
competitors of the Company, may assert patent, copyright and other intellectual
property rights to technologies that are important to the Company. There can be
no assurance that third parties will not assert infringement claims against the
Company in the future, that assertions by third parties will not result in
costly litigation or that the Company would prevail in any such litigation or be
able to license any valid and infringed patents from third parties on
commercially reasonable terms. Litigation, regardless of the outcome, could
result in substantial cost and would divert resources of the Company. Any
infringement claim or other litigation against or by the Company could
materially adversely affect the Company's business, operating results and
financial condition.

In certain instances, the Company has elected to rely on trade secret law rather
than patent law to protect its proprietary technology. However, trade secrets
are difficult to protect. The Company protects its proprietary technology and
processes, in part, through confidentiality agreements with its employees and
customers. There can be no assurance that these contracts will not be breached,
that the Company will have adequate remedies for any breach, or that the
Company's trade secrets will not otherwise become known or be independently
discovered by competitors. In addition, effective trade secret protection may be
unavailable or limited in certain foreign countries.

In addition, there can be no assurance that competitors of the Company, many of
which have substantial resources and have made substantial investments in
competing technologies, do not have, or will not seek to apply for and obtain,
patents that will prevent, limit or interfere with the Company's ability to
make, use or sell its products either in the United States or in international
markets. There can be no assurance that the Company will not in the future
become subject to patent infringement claims and litigation or interference
proceedings declared by the United States Patent and Trademark Office ("USPTO")
to determine the priority of inventions. The defense and prosecution of
intellectual property suits, USPTO interference proceedings and related legal
and administrative proceedings are both costly and time consuming. Any such suit
or proceeding involving the Company could have a material adverse effect on the
Company's business, operating results and financial condition.

Future Capital Needs; Uncertainty of Additional Funding

The Company intends to continue to invest heavily in the development of new
products and enhancements to its existing products. The Company's future
liquidity and capital requirements will depend upon numerous factors, including
the costs and timing of expansion of product development efforts and the success
of these development efforts, the costs and timing of expansion of sales and
marketing activities, the extent to which the Company's existing and new
products gain market acceptance, competing technological and market
developments, the costs involved in maintaining and enforcing patent claims and
other intellectual property rights, the level and timing of license and royalty
revenue, available borrowings under line of credit arrangements and other
factors. The Company believes that its current cash and investment balances and
any cash generated from operations and from available or future debt financing
will be sufficient to meet the Company's operating and capital requirements for
at least the next 12 months. However, from time to time, the Company may be
required to raise additional funds through public or private financing,
strategic relationships or other arrangements. There can be no assurance that
such funding, if needed, will be available on terms attractive to the Company,
or at all. Furthermore, any additional equity financing may be dilutive to



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stockholders, and debt financing, if available, may involve restrictive
covenants. Strategic arrangements, if necessary to raise additional funds, may
require the Company to relinquish its rights to certain of its technologies or
products. The failure of the Company to raise capital when needed could have a
material adverse effect on the Company's business, operating results and
financial condition. See "--Liquidity and Capital Resources."

Potential Volatility of Stock Price

The trading price of the Company's Common Stock has in the past been and could
in the future be subject to significant fluctuations in response to quarterly
variations in the Company's results of operations; announcements regarding the
Company's product developments; announcements of technological innovations or
new products by the Company, its customers or competitors; release of reports by
securities analysts; changes in security analysts' recommendations; developments
or disputes concerning patents or proprietary rights or other events. Also, at
some future time, the Company's revenues and results of operations may be below
the expectations of public market securities analysts or investors, resulting in
significant fluctuations in the market price of the Company's Common Stock. In
addition, the securities markets have, from time to time, experienced
significant price and volume fluctuations, which have particularly affected the
market prices for high technology companies and which often, are unrelated and
disproportionate to the operating performance of particular companies. These
broad market fluctuations, as well as general economic, political and market
conditions, may adversely affect the market price of the Company's Common Stock.
In the past, following periods of volatility in the market price of a company's
stock, securities class action litigation has occurred against that company.
Such litigation could result in substantial costs and would at a minimum divert
management's attention and resources, which could have a material adverse effect
on the Company's business, financial condition and results of operations. Any
adverse determination in such litigation could also subject the Company to
significant liabilities.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

The Company filed its report on Form 8-K regarding the acquisition of certain
assets of the physical library business of Synopsys, Inc. on January 19, 2001.



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                                   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.

Dated: February 14, 2001

                             ARTISAN COMPONENTS, INC.
                                    (Registrant)

                         By: /s/ Mark R. Templeton
                             --------------------------------------------
                             Mark R. Templeton
                             President, Chief Executive Officer and Director
                             (Principal Executive Officer)

                         By: /s/ Joy E. Leo
                             --------------------------------------------
                             Joy E. Leo
                             Vice President, Finance and Administration and
                             Chief Financial Officer
                             (Principal Financial and Accounting Officer)



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