Commentary:
EDA Industry Update May 2005 -- What did the Last Quarter Bring?
by Dr. Russ Henke and Dr. Jack Horgan
Henke Associates
In the
May 2003
,
August 2003,
December 2004,
February 2004,
May 2004,
August 2004,
December 2004 and
February 2005 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. The selected companies were
Altium, Ansoft, Cadence, Magma, Mentor Graphics, Nassda, Synopsys, Synplicity and
Verisity.
This May 2005 report covers their performances for the nominal first quarter 2005.
In this issue, EDA News Highlights are followed by the revenue & earnings performances of the selected group of EDA players for Q1 2005, and then EDA vendor by vendor details. A comparison of the quarter's results for the Top 3 EDA companies vs. the Top 3 MCAD entities is provided next. EDA Vendor stock prices are discussed. Finally, individual EDA vendor forecasts for Q2 2005 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. Because of the timing,
Nassda will but
Verisity will not be covered in this Commentary. Neither vendor will be separately included in future EDA Industry commentaries.
Replacement nominations for publicly traded EDA entities for future coverage are being accepted. Send an email to
Email Contact.
EDA News Highlights
On April 4, 2005
Magma announced the availability of its next generation of design software, the result of its recent 18-month-long Cobra development initiative.
The
Magma-Synopsys litigation continues. The recent focus was on Dr. van Ginneken, a former employee of both firms. His name appears on the patents Magma has asserted against Synopsys. Synopsys claims that his deposition during discovery shows that the ideas underlying these patents were conceived while he was an employee at Synopsys. Magma's response is that Ginneken's declaration is in response to Synopsys $100 million lawsuit that has now been dropped.
On April 7, 2005
Cadence completed the acquisition of
Verisity in an all-cash transaction for approximately $315 million.
On May 2, 2005 the
Semiconductor Industry Association (SIA) reported that the worldwide sales of semiconductors grew by 13.2% in the first quarter of 2005 compared to the same period of 2004. Global sales of semiconductors in the first three months of 2005 amounted to $55.3 billion compared to $48.9 billion in the first quarter of 2004. Sales were up by 0.4% sequentially from revenues of $55.1 billion in the fourth quarter of 2004.
March sales, at $18.43 billion, were up by 2.2% from the February level of $18.37 billion.
 |
SIA President George Scalise said, "Worldwide sales of semiconductors continued to outpace forecasted levels in the first quarter of 2005. The first quarter is historically a relatively weak one for the microchip industry. The unexpected strength of semiconductor sales, with 13 percent growth over a very strong period a year ago, is a good sign for the industry." He continued, "The main factors underlying the industry's relatively strong first-quarter sales were higher than expected sales of wireless handsets, personal computers, and consumer electronics. We expect sales in the current quarter will be flat to nominally higher than the first quarter. As we reported last month, our earlier projection for flat sales for the year as a whole now appears to have been overly cautious."
On May 10, 2005
Synopsys completed its acquisition of
Nassda, a provider of full-chip circuit verification software for complex nanometer semiconductors, for $200 million in cash or a net of $46 million after subtracting $92 million in Nassda cash and $62 million in litigation settlement by individuals.
On May 26, 2005
Mentor Graphics announced it had acquired
Volcano Communications Technologies AB (VCT), including the complete product line of Volcano's automotive networking series which includes network design tools, embedded software and test and validation tools for all major automotive networks. Terms of the deal were not disclosed.
Also on May 26, 2005, Richard Goering of EETimes reported that
Mentor Graphics is negotiating the purchase of
Aptix, one of the early players in the rapid prototyping market. Goering further stated, "Mentor has made no announcements, but a spokesman confirmed that a deal is in the works." In addition, Goering said, "Hamdi El-Sissi, Aptix CEO, confirmed the pending acquisition and said the two companies are currently in the process of ironing out the details." At the risk of sounding like Newsweek, an anonymous source told the authors of this May 2005 EDA Commentary, that a figure of between $1 million and $2 million is involved in the acquisition by Mentor Graphics of Aptix.
How did the EDA Vendors fair during the First Quarter of 2005?
As shown in
Table 2, the
combined revenue performance of eight EDA vendors was $792 million, down 2% from the $807 million during the same period a year earlier and down 11% from the prior sequential quarter. The collective year-over-year quarterly performance represents the general revenue flatness of the EDA industry in recent years.
With a drop of 17%, Synopsys was the only EDA vendor in the list with declining year-over-year revenue. Ansoft and Nassda had growth over 20% and Mentor Graphics grew 10%. The remaining firms showed only single digit growth.
On a sequential basis, in comparison to the traditionally strong fourth quarter, combined revenues were down 11%. Mentor Graphics suffered the largest decline at 23.5%. Altium and Cadence had percentage declines in the mid-teens. Ansoft created the largest sequential growth at 25%, followed by Nassda at just under 10%.
 |
 |
 |
Figures 1 and
2 above provide additional revenue comparisons among vendors.
Cadence maintains its revenue leader role in Q1 2005. The big three (Cadence, Mentor Graphics and Synopsys) accounted for 88% of the combined revenue of this group. Magma, the next largest revenue producer, is roughly one-fifth the size of Mentor and contributes only about 5% of the combined revenues of the eight covered vendors.
Turning to earnings performances in Q1 2005,
Table 3 shows that the EDA group of seven (Altium did not report earnings) reported a combined net loss in the latest quarter of $6.7 million, down substantially from the $30 million gain a year earlier and from a $57 million profit the just-previous quarter. Most of the year-over-year drop was due to Synopsys. Most of the sequential drop was due to Cadence and secondly to Mentor Graphics.
Company by Company Q1 2005 details:
Be the first to review this article
