Commentary: EDA Industry Update December 2004 -- What did the Last Quarter/Year Bring?

Commentary:

EDA Industry Update December 2004 -- What did the Last Quarter/Year Bring?


by Dr. Russ Henke and Dr. Jack Horgan
Henke Associates


In May 2003, August 2003, December 2003, February 2004, May 2004 and August 2004 EDA Commentaries by the authors (published on EDACafe.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. This December 2004 report covers their performances for the third quarter of 2004. This Commentary was published on a schedule to ensure that Synopsys' latest results could be included.


News Highlight

On December 1, 2004 Synopsys, Inc. and Nassda Corporation announced an agreement by which Synopsys acquires Nassda Corporation in an all-cash transaction at $7.00 per share and, subject to the closing of the acquisition, to settle all outstanding litigation by Synopsys against Nassda and certain Nassda officers, directors and employees. The aggregate purchase price will be approximately $192 million, or approximately $92 million net of Nassda's estimated cash at closing. In addition, upon closing, the Nassda officers, directors and employees who are defendants in the litigation between Synopsys and Nassda will make settlement payments to Synopsys in the aggregate amount of $61.6 million.

Rex Jackson, vice president and general counsel of Synopsys, commented "This acquisition successfully resolves the litigation between our two companies and sends a strong message of Synopsys' commitment to protecting and preserving its intellectual property. By acquiring Nassda rather than continuing through the courts, Synopsys can preserve Nassda's products and continue long-term support of Nassda's customers."

The litigation involved allegations that Nassda misappropriated Synopsys' trade secrets and used Synopsys' intellectual property in developing HSIM. The technology in question was originally developed by Epic Design Technology Inc., acquired by Synopsys in 1997. Several individuals who became key Nassda employees left Synopsys' Epic division at the same time. The initial suit was filed in February 2000.

How did the EDA Vendors fair during the THIRD quarter of 2004?


Table 1 Nine Public EDA Companies' Latest Quarterly Revenue Performances



The combined performance of the nine EDA vendors was $793 million, down 5.2% from the same quarter last year and down 3.2% sequentially (quarter-to-quarter). Since seven out of the nine EDA vendors selected registered year-over-year revenue increases, the drop in the combined performance is due mostly to Synopsys' results. Synopsys' revenue fell 27% year-over-year due primarily to a shift that began last quarter from upfront licenses to time based licenses. Altium dropped 6%. Four vendors had significant increases ranging from 29% to 43%. Magma was the group percentage leader at 43%.

On a sequential basis, Ansoft and Verisity had the best performances at 26% and 23% growth respectively. Mentor Graphics and Synplicity had slight drops in quarter over quarter revenue. Altium and Synopsys had significant sequential drops in revenue.

How did the EDA Vendors fair during the THIRD quarter of 2004?


Figure 1 EDA Vendor Relative Size
(based upon Q3 2004 Revenues)



For some time, Cadence and Synopsys have been competing for top quarterly revenue honors. This quarter Cadence was the clear winner as Synopsys' revenue fell 27%. The top three vendors accounted for 87% of the combined revenue.


Table 2 Eight Public EDA Companies' Latest Quarterly Earnings Performances ($000)



The combined net income for the nine EDA vendors in the third quarter was a net loss of $14.8 million, mostly due to Synopsys' $28.4 million loss in the quarter. Mentor and Versisity also had losses. On a year-over-year basis Cadence had a dramatic turn around going from a net loss of $14.5 million to a net profit of $19.6 million, due to $63 million restructuring charges in the prior year and a $14 million payment from Mentor Graphics. This payment also impacted Mentor's relative performance. Mentor's performance in the second quarter was negatively impacted by a one time $36 million tax charge.



Company by Company Q3 2004 details:

On October 18, 2004 Altium Limited reported its results for the first quarter of 2004/2005 financial year ending September 30, 2004. Total revenue for the quarter was $(AUD) 8.1m. Overall, product sales in local currencies were up 7% from the same period last year; however, due to exchange rate fluctuations, the result in AUD was down 9%. America and Europe each account for about 40% of Altium's revenues. Altium achieved its third consecutive quarter of improved product sales. During the quarter the company successfully released Protel 2004 and Nexar 2004. The company offered no information on earnings.

On November 18, 2004 Ansoft Corporation announced results for its second quarter of FY 2005 ending October 31, 2004. Total revenue for the quarter was $15.9 million, an robust increase of 30% over the $12.2 million for the same quarter a year earlier and a 26% increase sequentially. License revenue, which accounted for 54% of total revenue, increased 26% year-over-year and 40% sequentially. Service and other revenue was up 46% year-over-year and 12% quarter-over-quarter. North America accounted for 40% of total revenue, Europe 44% and Asia 16%. On a year-over-year basis North America grew 4%, Europe 55% and Asia 60%. The Electromechanical segment generated 23% of revenue, while High Performance accounted for 77%. The former grew 66%, while the latter grew 22%. The top three customers were Intel, Siemens and Raytheon.

Net income for the quarter was $1.9 million as compared to a net loss of $22 thousand a year earlier and a net profit of $32 thousand in the previous quarter.

"We are pleased with the continued revenue growth in both product lines and in our domestic and international markets this quarter," said Nicholas Csendes, Ansoft's President and CEO.

On October 20, 2004 Cadence Design Systems, Inc. reported its results for the third quarter. Total revenue was $302 million, up 12.2% compared to $269 million a year earlier and up 5.1% compared to $287 million the prior quarter. The Q3 revenue was at the low end of the range ($300 to $310) given for guidance in July 2004. Product revenue of $183 million was up 20% year-over-year and 11% sequentially. Both maintenance at $84 million and service at $34 million registered small percentage gains year-over-year but sequentially were down 0.5% and 7.5%, respectively. On a geographic basis, North America counted for 56%, Europe 20%, Japan 15% and Asia 9% of total revenue. These percentages have held about the same over the last year. Digital IC Design, Custom IC Design and Functional Verification were the product group leaders at 27%, 27% and 18% of total revenue, respectively.

Cadence recognized net income of $20 million, compared to a net loss of $14 million in the same period last year and a net gain of $3.8 million the prior quarter. In the third quarter of 2003 there was a restructuring charge of $63 million and a receipt of $14 million payment from Mentor Graphics as part of a legal settlement relating to patented emulation and acceleration systems technology. Cadence expenses in the prior quarter were $18 million higher.

" Cadence once again executed to plan, delivering consistent performance in an environment that remains challenging, " said Michael J. Fister, Cadence President and CEO. " By partnering with our customers to help them tackle their biggest design challenges, we continue to gain traction with our world-class technology. "

"Our customers are increasingly receptive to the technology and customer-centric philosophy Cadence brings to the table," Fister said. "Our successes this past quarter have been driven by our broad product mix, deep partnerships and an outstanding global employee base passionate about customer success."

In August 2003, Cadence issued $420 million of senior notes convertible into common stock. According to the Emerging Issues Task Force consensus, this requires an additional 26.8 million shares of Cadence common stock be included in calculating fully diluted earnings per share.

On October 28, 2004 Magma Design Automation Inc. reported the results for its second quarter of fiscal 2005 ending September 30, 2004. Magma reported record revenue of $36.9 million for the quarter, compared to $25.8 million for the quarter ended September 30, 2003, a remarkable increase of 43 percent. This was also a 2.5% increase over the prior quarter revenue figure of $36.0 million. This was within the range of $35 million to $39 million given for guidance. However, Magma's orders in the quarter were below its expectations as announced during Magma's July 28 earnings call. Magma's performance on all other measures was within its target ranges established during Magma's July 28 earnings call.

Magma also reported GAAP net income of $287 thousand and pro forma net income of $7.7 million for the quarter. This compares to GAAP net income of $3.4 million and pro forma net income of $6.0 million for the second quarter of fiscal 2004. It also compares to GAAP net loss of $2.5 million and pro forma net income of $7.7 million for the prior quarter.

"Our second quarter continued Magma's growth in revenue, which has increased for eight consecutive quarters," said Rajeev Madhavan, chairman and CEO of Magma. "But as we said during our conference call to discuss our revised outlook, we are disappointed in the quarter from the perspective of new orders. We intend to resume our previous level of business success, and over the next several quarters expect to introduce new products, several of which represent the fruition of our recent acquisitions. Some will offer improved capabilities where our technology is already well established, and some will enable us to enter new market segments where we think existing solutions are inadequate. We expect these new offerings to further differentiate Magma from our competitors."

On October 21, 2004 Mentor Graphics Corporation announced its results for the third quarter. Total revenue for the quarter was $162 million, up over 3% from the same period a year ago but down 4.5% sequentially. Q3 revenue results were below the guidance of $165 million to $179 million given earlier. Systems and software revenue dropped over 8% from the prior quarter while service and support revenue was up nearly 1%.

By geographic region revenues were up 8% in Europe, up 5% in Japan and 18% in the Pacific Rim but down 3% in the Americas. Revenue as percentage of total revenue by region was 40% Americas, 30% Europe, 20% Japan, and 10% Pacific Rim.

For the quarter Mentor reported a net loss of $5.7 million, compared to a loss of $12.8 million a year ago and a loss of $32.8 million the previous quarter. This quarter's improvement is due mostly to special charges reducing prior quarters. The net income for the second quarter contained a tax charge of $36.6 million arising from a one-time dividend declared by the company's Irish subsidiary to the US parent company. Without this charge there would have a net profit of $3.8 million that quarter. In the same period a year ago there were $20 million in special charges primarily related to the settlement of protracted litigation over emulation and hardware acceleration patents.

"Although growth in the third quarter was slow, it was primarily due to the timing of major orders," said Walden C. Rhines, chairman and CEO of Mentor Graphics. "Year to date bookings have grown over 8% and we expect an all-time record level in fourth quarter and full year bookings growth of 10%."

On September 1, 2004 Mentor completed its acquisition of 0-In Design Automation , a provider of assertion-based and formal verification solutions with ~40 employees, for $50 million. Mentor has set up the 0-In Functional Verification business unit to be headed by Steve White, former CEO of 0-In.

"Customer interest in the 0-In acquisition is as strong as I've ever seen interest in a newly acquired product line," said Gregory K. Hinckley, president of Mentor Graphics. "We expect as we fully integrate 0-In into our Scalable Verification Platform that we'll see continued market share gains in the verification space."

On October 19, 2004 Mentor Graphics announced additional functionality for the Calibre design-to-silicon platform in the form of Calibre Transition, Measure and Analyze to address critical design for manufacturing (DFM) requirements. Mentor also outlined its long-term roadmap for future Calibre DFM tools.

On October 19, 2004 Nassda Corporation announced the results for its fourth quarter and for its fiscal year 2004 ending September 30th. Total revenue for the quarter was a record $11.0 million, a 31% increase from $8.4 million for the same quarter last year although substantially unchanged from $11.0 million for the prior quarter. Q4's revenue was at the high end of the range given for recent guidance. The geographic breakdown was US at 66% of total revenue, Europe 5%, Japan 21% and rest of Asia 4%. Nassda bookings in Q4 included one multimillion dollar order, one at ~ $1 million, 5 between $500,000 and $1 million, and 3 between $300,000 and $500,000. The company added 7 new customers during the quarter. Time based licenses accounted for 60% of revenue in the quarter.

Net income for the quarter was $175,000, a decrease of $148,000 or 46% from $323,000 for the fourth quarter 2003 and a decrease of $891,000 or 84% from $1.1 million the preceding quarter. Expenses for this last quarter included $1.7 million in litigation costs related to suit by Synopsys.

Revenue for fiscal 2004 was $41.5 million compared to $35 million in fiscal 2003, an increase of 18%. Revenue by geography was US 64%, Europe 10%, Japan 18% and rest of Asia 8%. The composition of revenue by license type changed considerably during the year. Subscription revenue grew 53% while product revenue fell 24%. Net income for the year was $2.6 million, a 28% decrease from the $3.6 million in fiscal 2003.

"Nassda again achieved its highest level of quarterly revenue, and our cash, cash equivalents and short-term investments increased by approximately $1.6 million during the quarter to a total of $101.4 million, as of September 30, 2004," said Sang Wang, Chief Executive Officer.

On December 1, 2004 Nassda was acquired by Synopsys as described at the beginning of this Commentary.

On December 1, 2004 Synopsys, Inc. reported the results for its fourth quarter and the year of fiscal 2004. Synopsys was the last of the nine selected EDA vendors to report quarterly results. Total revenue for the quarter was $230.6 million, a 27% decrease compared to revenue of $316.5 million for the fourth quarter of fiscal 2003 and an 18% decrease compared to the just prior quarter. The explanation primarily lies in the shift away from upfront licenses to time-based licenses, wherein revenue is recognized over time as shown in the Table 3 below.




1 | 2 | 3 | 4  Next Page »



Review Article Be the first to review this article

EMA:

Featured Video
Editorial
Peggy AycinenaWhat Would Joe Do?
by Peggy Aycinena
Retail Therapy: Jump starting Black Friday
Peggy AycinenaIP Showcase
by Peggy Aycinena
REUSE 2016: Addressing the Four Freedoms
More Editorial  
Jobs
ACCOUNT MANAGER MUNICH GERMANY EU for EDA Careers at MUNICH, Germany
Principal Circuit Design Engineer for Rambus at Sunnyvale, CA
Development Engineer-WEB SKILLS +++ for EDA Careers at North Valley, CA
FAE FIELD APPLICATIONS SAN DIEGO for EDA Careers at San Diego, CA
AE-APPS SUPPORT/TMM for EDA Careers at San Jose-SOCAL-AZ, CA
Manager, Field Applications Engineering for Real Intent at Sunnyvale, CA
Upcoming Events
Zuken Innovation World 2017, April 24 - 26, 2017, Hilton Head Marriott Resort & Spa in Hilton Head Island, SC at Hilton Head Marriott Resort & Spa Hilton Head Island NC - Apr 24 - 26, 2017
CST Webinar Series



Internet Business Systems © 2016 Internet Business Systems, Inc.
595 Millich Dr., Suite 216, Campbell, CA 95008
+1 (408)-337-6870 — Contact Us, or visit our other sites:
AECCafe - Architectural Design and Engineering TechJobsCafe - Technical Jobs and Resumes GISCafe - Geographical Information Services  MCADCafe - Mechanical Design and Engineering ShareCG - Share Computer Graphic (CG) Animation, 3D Art and 3D Models
  Privacy Policy