Synopsys (Nasdaq: SNPS) reports its fiscal third-quarter 2008 earnings Wednesday. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

What management says:
Three months ago, CEO Aart de Geus boasted that Synopsys was delivering "predictable revenue growth and solid earnings expansion." But hold up a sec -- while revenues did indeed grow 11%, didn't Synopsys's GAAP profits drop a penny?

What management does:
Indeed they did. And as the table below shows, Synopsys's net margin slipped in consequence. Yet look a little closer at the table, and you'll find a clue why -- in the 2007 quarters that ended in July and October, Synopsys was netting more than its own operating margin!

The reason: Synopsys booked a $12.5 million in a settlement with Magma Design (Nasdaq: LAVA) in the quarter ended July 2007, and that figure inflated its net. Back that out, and profits grow year over year -- as the near-doubling in operating margins reflects. Synopsys now boasts an operating margin superior not only to Magma but to Cadence Design (Nasdaq: CDNS) and Mentor Graphics (Nasdaq: MENT) as well.

(Read more about these latter two companies' pale imitation of the Microsoft (Nasdaq: MSFT) / Yahoo! (Nasdaq: YHOO) merger saga merger saga.)

Margins

1/07

4/07

7/07

10/07

1/08

4/08

Gross

82.4%

82.6%

82.7%

82.6%

82.5%

82.3%

Operating

4.4%

7.1%

7.9% Continued...