The company's net loss for the second quarter of 2006 was a mere $448K, compared to a loss of $6.8 million in the second quarter of 2005, and a loss of $5.9 million in the first quarter of 2006. The 2nd quarter recorded special charges of just $917K, compared to $2 million in special charges and acquisition related charges in the same quarter a year earlier.
Walden C. Rhines, chairman and CEO of Mentor Graphics, said, “Mentor Graphics turned in another strong quarter. Calibre continued to drive the business as design-for-manufacturing adoption strengthened. Customer adoption of the 90nm and 65nm process nodes, as well as prototyping at 45nm, is driving larger customer purchases."
On August 16, 2006 Synopsys, Inc. reported financial results for its third quarter of fiscal 2006, the period ended July 31, 2006. Total revenue for the quarter was $277 million, a good increase of 10% from the $251 million in the same quarter a year earlier, and an almost 1% increase form the $275 million in the prior quarter. TBL (time based license) revenue was $225 million, accounting for 81% of total revenue. This was a 19% increase year-over-year, and over a 7% increase sequentially. Upfront license revenue decreased of nearly 11% year-over-year and 44% sequentially. Maintenance and service revenue was $38 million, accounting for almost 14% of total revenue. This was a decrease of 18% year-over-year, and a decrease of 3.5% sequentially.
From a product perspective, 52% of revenue came from core Galaxy design, 26% from Discovery verification solutions, 8% came from IP, 10% from DFM, and 4% came from professional services. Table 8.
From a geographic point of view, North America accounted for 53% of total revenue, Europe 17%, Japan 16% and Asia Pacific 14%. North American revenue increased 9% year-over-year, but declined 1% sequentially. European revenue increased almost 17% year-over-year, and 10.5% sequentially. Revenue from Japan grew over 13% year-over-year, but declined 8% sequentially. Revenue from Asia Pacific grew 4% year-over-year, and almost 10% sequentially.
Net income for the quarter was $7.5 million, compared to $17.3 million in the corresponding quarter last year, and $5.4 million in the previous quarter. In the year ago quarter there was a one-time gain associated with a litigation settlement received in connection with the acquisition of Nassda Corporation. GAAP net income for the current period includes employee stock-based compensation expense of $15.6 million.
Aart de Geus, chairman and CEO of Synopsys, said, “Our third quarter was excellent, as we again executed well on all fronts. Our momentum is visible through strong financial results, customer adoptions of our technology and the introduction of innovative new products.”
On July 25, 2006 Synplicity, Inc. reported financial results for the second quarter the period ended June 30, 2006. Total revenue was $15.4 million, an increase of 1.3% over the $15.2 million in the same quarter a year ago, and a 6.3% increase sequentially over $14.5 million. License revenue was $7.9 million, accounting for 52% of total revenue. This was a decrease of 5% year-over-year, and an increase of 11.5% sequentially. Maintenance revenue was $7.5 million or 48% of total revenue. This was an increase of 9% year-over-year, and an increase of 1.4% sequentially.
Net income for the quarter was $1.1 million. This was a modest increase from the $921K net income a year ago, and up considerably from the net loss of $1.1 in the just previous quarter. Much of the year-over-year difference was in the area of stock-based compensation expense.
Gary Meyers, president and CEO of Synplicity, said, “During the second quarter, we re-focused the company onto our core FPGA implementation strength and delivered solid execution to our plan, resulting in revenue and earnings growth despite our exit from the ASIC business. Orders in our focused growth areas of Synplify Premier, Certify, and Synplify DSP exceeded our expectations and continued to demonstrate our leadership. With spending under control and an exciting roadmap of unique high value solutions in hand, we look forward to building greater shareholder value in the future.”
EDA versus MCAD
The detailed quarterly performances of a selected group of public MCAD Vendors has been provided in the authors' August 2006 MCAD Commentary recently published on IBSystems' portal MCADCafe.
As Table 9 below shows, the three top mechanical CAD companies (Autodesk, Dassault Systemes and UGS) sported Q2 2006 revenues of $1,107 million, 36% higher than the $813 million from the three leading EDA firms. This quarter, Autodesk announced that it had begun a voluntary review of the company's historical stock option granting practices and the related accounting. As a consequence, the firm did not provide any earnings data, so comparing earnings of the top 3 this quarter is not relevant.
Keep in mind that Autodesk sells its products predominantly through valued added resellers and distributors. Dassault Systemes sells predominantly through IBM and its Business Partners and in some instances, notably SolidWorks, through VARs. Thus, if one were to count actual end user purchases of the latter MCAD products, the combined MCAD revenue total would raise the Big 3 MCAD dollar total substantially. On the other hand, Autodesk has not-insignificant revenue outside MCAD in AEC, GIS and Media/Entertainment.
The comparison of earnings across the two industries is also difficult general due to a plethora of one-time charges associated with acquisitions. The earnings comparison for UGS is further complicated by purchase accounting adjustments related to its Venture Capital buyout from EDS.
EDA Vendor Stock Performance
As shown in Tables 10 and 11 and Figure 3 below, the combined stock prices for the EDA vendors were up 24% year-over-year in absolute dollars, and up 27% in average percentage change. This compares to a nearly 4% drop in average price for the three leading stock indexes. Ansoft is the growth leader at +70%, with Altium close behind at 58%. Cadence and Mentor had over 20% year-over-year growth. Magma (LAVA) was the only decliner at -12%.
The combined stock prices on a sequential basis rose 6.2% in absolute dollars, an average price increase of about 5%. Altium was the biggest gainer at 52%. Cadence was a distant second at 14.5%. Magma had 38% sequential decline in stock price. Mentor was the only other decliner at -5.3%. In Q2, the three major stock indexes rose an average of 7.4% from the just prior quarter.
Forecast Guidance from Individual EDA Providers
The combined revenue forecast for the next quarter (Q3 2006) is for about 5% growth year-over-year, but a 1.6% drop compared to the 2nd quarter just reported. Ansoft is the most optimistic regarding year-over-year quarterly growth. Only Synplicity predicts a decline. Ansoft is also the most bullish on a sequential basis at almost 17%. Magma is the only other firm forecasting growth. (Table 12).
Individual Company by Company Guidance
Altium did not provide any guidance for the next quarter. For fiscal 2005/2006, Altium expects revenue to be AUD 45.5 million compared to AUD 40.1 million the previous financial year. This is the result of expected annual product sales growth in the US (up 32%), SE Asian (up 25%) and European (up 14%) markets and represents an overall annual increase of 20%. Altium also expects profit after tax between AUD 1.0 million and AUD 1.5 million for the 2005/06 financial year.