January 13, 2003
Buy low - Sell high
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A picture's worth a 1000 words
When “buy,” “hold,” or “sell” recommendations from stock analysts end with an exclamation point, it's high time to step back and take a calm, analytical look at the companies and industry generating such histrionics and hyperbole. In that spirit, what is the current state of affairs for some of the core stocks in the EDA domain?
Acknowledging that over the last several years, a number of these companies have waffled as to whether they want to be categorized as EDA vendors or IP vendors - the following charts, available on-line, represent recent stock histories for a handful of publicly traded companies that fall within the GartnerGroup listing: Electronic Design Automation Software Companies.
Meanwhile, EDAC has stopped making it easy to access these stock histories through their consortium's website. That's a pretty big hint that the glamour days of high stock valuations might be over for a while. Probably for the best - those glamour days seem to have been more about playing the market like a roulette table and less about examining the business fundamentals of the companies behind the stock picks. A behavior, unfortunately, that characterized both private individuals and large institutional investors in the late 90's across all sectors in the market.
So if you're interested, you can click on the links below, check out the graphs over the last several years, and draw your own conclusions about the health and immediate future of the industry.
Here are a few observations:
- IPO's in the industry have slowed to a crawl in the last 12 months compared to the rate witnessed in 2000 and 2001.
- Nobody's stock valuations survived the horrific tragedies of September 11th unscathed.
- EDA's done neither worse nor better than other recession-haunted industries.
- A number of these stock histories reflect a fundamental shift in the business strategies within EDA companies - moving from a license-based revenue model to a subscription-based model. Short-term revenues may have been negatively impacted by the move, but long-term revenues should be more reliable. Some stock valuations have also been impacted by significant acquisition costs.
- In general, few if any of the stocks are currently trading in the neighborhood of their historical two-year high.
- However, some of the companies have actually been doing okay of late. Management in those companies might offer explanations, but it's not clear that they understand the black-box dynamics of this market any better than the management of the companies whose stocks have tanked.
- The technology behind this industry is still solid and continues to improve with each new revision and release. A whole lot of this software is being used out there and more will be needed as the process technologies move into smaller geometries and designs grow more complex.
- Still, several of the larger companies are predicting flat earnings for the year, and EDAC is equally understated about it's predictions. In a recent market report, EDAC Chairman and Mentor Graphics CEO Wally Rhines said, “Increasing purchases of EDA products and maintenance reflects the priority that electronics companies place on maintaining a strong design capability despite tight budget constraints.”
- The long-term prospects are good, however. Chip sales, world wide, are on the rise and there are hints that design starts are starting to pick up once again. EDA and IP continue to be key industries in the semiconductor design and supply chain. That has not changed, nor will it.
- Buy low, sell high. If you've got some extra cash sloshing around, now may be a good time to buy, with or without exclamation point.
- But if you are going to buy, be prepared to hold on to your investment for a while.
AMD and IBM announced that the two companies have entered into an agreement to jointly develop chip-making technologies for use in future high-performance products. The new processes, developed by AMD and IBM, will be aimed at improving microprocessor performance and reducing power consumption, and will be based on advanced structures and materials such as high-speed silicon-on-insulator (SOI) transistors, copper interconnects, and improved low-k dielectric insulation. The agreement includes collaboration on 65- and 45-nanometer technologies to be implemented on 300mm wafers.
the bandgap reference with the original 52 design variables, under nominal conditions and three worst-case conditions, and also used to optimize the data receiver across the 256 variations.
Axis Systems, Inc. announced new, entry-level versions of Xcite and Xtreme verification systems. Both systems include four ReConfigurable Computing processor boards and new software. Both the Xcite 2500 simulation accelerator and Xtreme support assertion and behavioral processors, as well as RTL and gate processors. Axis has also added extended memory options for Xcite. The new systems are targeted at design teams working on portable system-on-chip (SoC) designs.
Amphion Semiconductor, Inc. announced that Lambda Systems Inc. utilized the company's Motion-JPEG image compression technology in a high-performance color video graphics processing system for HDTV applications. Licensed for use in ASIC designs developed by the IC design division of Lambda Systems, I.C. Corp., the Amphion CS6150 Motion-JPEG Decoder core has been fabricated in 350-nanometer gate array devices from NEC Electronics.
Cadence Design Systems, Inc. and Agere Systems announced enhancements to the Cadence Assura RCX platform for layout parasitic extraction. Cadence has incorporated Agere Systems' Nebula technology, licensed exclusively to Cadence, into the Assura RCX product line to create an integrated, fast field solver capability in a device-level extractor. The combined technology provides parasitic extraction for selected nets or blocks. RCX enables analysis of electrical performance with parasitic extraction from the physical layout, and provides a design approach for integrating a field solver into a full-chip, extracted netlist.
Mentor Graphics Corp. announced that Alcatel's Raleigh, N.C. location has chosen the Mentor Graphics Board Station PCB design suite to standardize its design flows and methodologies, replacing Alcatel's existing PCB design tools and allowing designers at the Raleigh location to share libraries and design data. The Alcatel Raleigh site also selected Mentor's ICX signal integrity tools and AutoActive routing environment. The Alcatel Raleigh location implementation is expected to be complete by the beginning of 2003.
into the system.
pre-mapped code module for the Xilinx Virtex-E family of FPGAs.
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-- Peggy Aycinena, EDACafe.com Contributing Editor.
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