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In a late-May 2003 EDA Commentary by Russ Henke (published on EDACafé.com), the then-current yearly and quarterly financial performances of a select group of publicly traded Electronic Design Automation (EDA) companies were analyzed and compared. Expectations with respect to the future financial performances of these same EDA entities were documented as well. (For additional information on the selected EDA companies, click here).

The conclusions in May? A gloomy economic outlook still gripped most high-tech companies. The public EDA segment was doing slightly better than its MCAD counterpart, but not by much. The May data further suggested that the remainder of 2003 was no more promising than 2002, for either the EDA vendors or the MCAD software suppliers - although the EDA vendors might have had a slight edge.

Now three months later, it's appropriate to ask how prescient were those EDA industry predictions back in May, and what's the outlook today for the rest of 2003 and beyond? Dr. Henke again offers his thoughts on the subject.

August - a great time of the year! Summer vacations, picnics, golf outings, hot pennant races in baseball, exhibition football underway, the excitement of a new school term soon to begin, all the important stock market averages up since January 1, 2003 … Marvelous!?

Alas, all is not well across the land. Jobs are still vanishing; international terrorism lurks, now including the specter of shoulder-fired missiles; war and casualties continue unabated in Iraq, Afghanistan, and elsewhere; most corporate fraud remains unpunished; deregulated electric power blackouts return; and federal and state deficits are out of control. "There has been a dissipation of the huge budget surplus (since 2000), and all we have to show for that is the city of Baghdad", said Nobel laureate, economist and MIT professor emeritus Robert Solow (NY Times, August 14, 2003).

It also appears that the overall climate for high technology has not improved significantly this year, although perhaps a few more reasons for optimism exist today than were evident back in May of this year. The U.S. GDP perked up some in Q2 2003. Business purchases of equipment and software rose 7.5% in the same period, the best showing in several years according to Moody's Investors Service. However, U.S. consumer sentiment fell unexpectedly in August as Americans weighed in on a lukewarm economic recovery, one with clearly visible hot spots, that has yet to show its staying power, according to a Reuters report on Tuesday, August 19.

Other problems still remain in high tech as well, not the least of which is the ongoing loss of jobs, particularly in manufacturing. Manufacturing payrolls have contracted every month since July 2000 in the United States. Per reports, a not insignificant number of the U.S. manufacturing jobs being lost are (a) going overseas, (b) not just the ol' outsourcing of drudgery labor of past decades, and (c) unlikely to ever be recovered here. (Refer to: " The U.S. Is Falling Asleep on the Job", FORTUNE, Tuesday, August 12, 2003, Geoffrey Colvin)

In the Fortune article, Colvin stated, "Those developing countries [outside the U.S.], which obviously have always had people just as smart as ours, are now turning out people just as educated. They can design the work, too, and, because educational and living costs are a fraction of ours, companies in those countries can afford to hire those people. That is a profound change: Designing the work is the essence of business, management, [and] competitiveness."

Graph 1 below provides stark data on professional salary differences among countries.

Graph 1 Average Annual Salaries of Professional People Source: TechniCom ( www.technicom.com) e-Weekly Issue 125, 12 August 2003, referencing a recent Ittoolbox (crm.ittoolbox.com) survey of over 3000 professionals.

Similarly, Louis Uchitelle said in a N.Y. Times article dated August 17, 2003, "As factories move abroad, so does U.S. power."

Meanwhile, readers of this author's past commentaries will recall this assertion: "Both MCAD and the slightly more youthful companion industry of EDA are arguably responsible for enabling virtually all contemporary design-analysis-manufacturing industries - industries which are key to creating real productivity and national wealth in every modern economy."

In the U.S. today, therefore, not only is there less manufacturing for EDA and MCAD to enable, but also there may be fewer highly skilled CAD-tool users as more design positions disappear offshore.

For certain, most MCAD industry companies are not thriving in the currently depressed environment (see the August MCAD Commentary). Moreover, Silicon Valley - where six of the nine EDA companies covered in this EDA industry article are headquartered - still suffers from unemployment levels several percentage points above the national average.

In the following section, we'll examine just how well the EDA companies are fairing and coping with these challenges.

Any EDA industry progress in Q2 2003?

The tables below reflect recent progress across a group-of-nine publicly traded EDA entities similar to those selected for discussion in the May 2003 EDA Commentary. In May, we saw that, on average, the EDA players had more percentage revenue growth in 2002 over 2001, than the MCAD companies. Also, the EDA list contained several companies with larger extremes of revenue performance than the MCAD list. However, the EDA list also showed an average loss at the net income line for 2002, while the MCAD list reported a slight net profit on average. Both groups posted a decline in net income for 2002, compared to 2001.

Was Q2 2003 any kinder to the EDA companies?

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