Commentary: EDA Industry Update June 2008 -- What did the Last Quarter Bring?by Dr. Russ Henke and Dr. Jack Horgan
In the May 2003, December 2003, February 2004, August 2004, December 2004, February 2005, May 2005, August 2005, December 2005, February 2006, May 2006, August 2006, December 2006, February 2007, May 2007, August 2007, November 2007 and March 2008 EDA Commentaries by the authors (published on EDACafé.com), the then-current yearly and quarterly financial performances of a selected group of publicly traded Electronic Design Automation (EDA) companies were analyzed and compared. Expectations regarding the future financial performances of these same EDA entities were documented as well. The selected companies were Altium, Ansoft, Cadence, Magma, Mentor Graphics, Nassda, Synopsys, Synplicity and Verisity.
This June 2008 report covers their performances for the nominal First Quarter of 2008.
In this issue, EDA News Highlights are followed by the revenue & earnings performances of the selected group of EDA players for Q1 2008, and then EDA vendor by vendor details. EDA Vendor stock prices are discussed. Finally, individual EDA vendor forecasts for Q2 2008 are provided. Enjoy!
Note: As part of continuing EDA industry consolidation, two previously-selected EDA vendors, namely Verisity and Nassda, have been acquired by others and hence have been dropped as independent entities from the authors' quarterly EDA Commentaries. As readers will see below, both Ansoft and Synplicity will soon join those ranks.
EDA News Highlights
On May 15, 2008 Mentor Graphics announced that it had acquired the assets of Ponte Solutions, Inc., the Mountain View, CA developer of model-based DFM solutions that analyze, predict, and reduce the impact of process variability during the manufacture and design of semiconductors. Terms of the transaction were not disclosed.
On March 11, 2008 Cadence announced that it had acquired Chip Estimate Corporation, a provider IC planning and enterprise-level IP reuse management solutions. Founded in 2003, Chip Estimate products are said to enable electronics design teams to predict the die size, yield, power consumption, performance, and cost of chips based on almost any design architecture, IP and silicon process node options.
On March 20, 2008 Synopsys announced it had signed a definitive agreement to acquire Synplicity, a supplier of FPGA and IC design and verification solutions. In addition to Synplicity's solutions for FPGAs, Synopsys will gain a rapid prototyping portfolio that complements its virtual prototyping business. Synopsys believes that combining Synplicity's hardware-based rapid prototyping and Synopsys' software-based virtual prototyping solutions will enable electronics companies to meet tight market windows with proven designs, even as software content continues to grow exponentially. Under the terms of the agreement, Synopsys will pay $8 cash per Synplicity share, resulting in a gross transaction of approximately $227 million, and approximately $188 million net of cash acquired. The acquisition was completed on May 16, 2008.
On March 31, 2008 ANSYS announced a definitive agreement whereby ANSYS would acquire Ansoft for a purchase price of approximately $832 million in a mix of cash and ANSYS common stock. ANSYS said that the strategic, complementary business combination of ANSYS and Ansoft would create the leading provider of 'best-in-class' simulation capabilities, with combined trailing 12-month revenues of $485 million (Ansoft's share = $98 million. Note: Ansoft has been covered every quarter in the authors' EDA Industry Commentaries in EDAcafe.com. Likewise, ANSYS has been covered every quarter in the authors' MCAD Industry Commentaries in MCADcafe.com).
When completed, ANSYS currently anticipates that the transaction will be modestly accretive to non-GAAP earnings per share in its first full year of combined operations. With over 40 direct sales offices and 21 development centers on three continents, the combined company will employ approximately 1,700 people. The two companies have headquarters in the Pittsburg, PA area.
Engineers use Ansoft software to achieve first-pass system success when designing mobile communication and Internet-access devices, broadband networking components and systems, ICs, PCBs and electromechanical systems. High performance electronics products account for 82% of revenue, electromechanical products 18%. In the latter group are electromagnetic field simulation software that is used for the design and analysis of 3D/2D structures, such as motors, actuators, transformers and other electric and electromechanical devices common to automotive, military/aerospace, and industrial systems and a software program that speeds the design and optimization process of rotating electric machines. (One of the authors of this EDA Industry Commentary, Dr. Russ Henke, came to know Ansoft when he helped sell the electromagnetic division of MCAE vendor MacNeal Schwendler Corporation to Ansoft in 1996. Henke served on the Board of Directors of MSC at the time).
IC's, systems on chips, and PCB's almost always end up as components in a larger system that has a mechanical engineering aspect, if only to house and to supply power and cooling to PCBs. Likewise, products from the consumer product segment like MP3 Players, digital cameras, GPS units, and cell phones are also a combination of electrical and mechanical elements. Hence the term “electromechanical” or “mechatronic”. Products that have long been thought of as principally mechanical, such as airplanes and automobiles, now are festooned with significant and increasing electronic content. Accordingly, most companies that manufacture industrial and consumer products today use a combination of EDA, MCAD and MCAE software tools.
Just in case some readers question this marriage, there is plenty of historical precedent for Computer Aided X (CAX) system and software vendors offering both electrical and mechanical software products. In the seventies and eighties, Burlington, MA-based Applicon (where both your current EDA Industry Commentary authors were once executives) offered three separate systems: PCB design; mechanical design, solid modeling, FEM analysis & manufacturing software; and IC photomask generation. Nearby neighbor ComputerVision also provided electrical and mechanical offerings. Both firms also developed and manufactured their own system hardware, incorporating OEM'd minicomputers to run the software. The highlight of any customer visit to either firm at that time, was a tour of the vendor's manufacturing facility.
CADAM was principally a mainframe-based 2D drafting system developed inside Lockheed. One of its major applications, however, was the creation of elementary wiring diagrams. CADAM also offered a mainframe PCB design system called PRANCE. In the late eighties, CADAM acquired PCAD, a microcomputer-based PCB systems.
Several firms today (e.g. Mentor Graphics, Dassault Systemes and UGS) offer products related to the creation, editing, routing and flattening of wire harnesses. Thermal analysis software is also often provided.
Most CAX firms also offer some form of data exchange between MCAD and EDA systems and some form of electronic schematic capture.
The reality is that the end-user engineers that sit in front of an EDA system to design chips and printed circuit boards, are almost never the people who sit in front of MCAD systems designing, say, aircraft engines or auto bodies. Likewise, these designers must eventually cooperate. For example, there may be a requirement for a 3D description of a PCB to be passed to a MCAD system to check for fit and clearance. There may also be a requirement for passing back a PCB's thermal profile to those concerned with the sizing of fans and with the control of air flow. These latter experts generally employ tools based on computation fluid dynamics (CFD) analysis. AEs and sales personnel of EDA and MCAD companies have considerably different educational backgrounds, experience and expertise. Offering both EDA and MCAE tools by one vendor becomes an interesting management challenge, but such challenges have been overcome successfully in the past.