Commentary: EDA Industry Update December 2006 -- What did the Last Quarter Bring?


The High Performance product segment accounted for 86% of total revenue, up from 81% a year earlier. The EMC product segment accounted for 14% of total revenue, down from 19%.

During the quarter, HP, Siemens and Raytheon were the largest Ansoft customers. The order from HP was the single largest order in company history. HP was a Platinum sponsor of Ansoft's recent worldwide seminar series. HP had been closely linked to Ansoft in the early days of HFSS, but the firms had temporarily drifted apart.

For the quarter, North America accounted for 49% of total Ansoft revenue, Europe 35% and Asia 16%.



Net income for the quarter was $3.7 million, down 9% from $4.1 million in the same quarter a year earlier, but up 62% from the $2.3 million in the just-previous quarter. The effective tax rate was 39%, versus 13% in the same quarter a year earlier when there was a $1 million foreign tax credit benefit. The prior year did not include stock based compensation expense, which was $600K in the current quarter.


On October 25, 2006 Cadence Design Systems, Inc. reported financial results for the third quarter the period ended September 30, 2006. Total revenue for the quarter was $366 million, an increase of 8.5% over the $337 million in the third quarter of 2005, and an increase of 2% from the $358 million in the prior quarter. Product revenue was $244 million, accounting for 67% of total revenue. This was a year-over-year increase of 12%, and a 5.3% increase sequentially. Service revenue was $34 million, accounting for 9% of total revenue. This was an 8% year-over-year increase, and a 3.5% increase sequentially.

Table 6 below presents the revenue breakdown by product segment (the original data provided by Cadence was presented in terms of percentages of total revenue). Functional Verification and System Interface segments had very good year-over year growth and somewhat smaller growth sequentially. Customer Design segment was the only other segment with double digit growth. Digital Design had more than 20% drop both year-over-year and sequentially. For the quarter, Custom Design accounted for 30% of total revenue, Functional Verification for 24%, Digital Design for 19%, System Interface for 10%, Services for 9% and DFM for 8%.



On a geographic basis North America accounted for 54% of total revenue, Europe 22%, Japan 13% and Asia 11%. On a year-over-year basis, NA was up 10.6%, Europe up 13.7% and Asia up 99%. Revenue from Japan was down 30% year-over-year. Sequentially, revenue from Europe was up 25%, from North America up 15% and from Asia up 12%, while revenue from Japan was down 45%.

Mike Fister, president and CEO of Cadence, said, “We continue to execute on our strategy. We are growing our core business and in the case of verification, expanding the market.”

Bill Porter, executive vice president and chief financial officer, added, "Again in the third quarter we achieved our targets for revenue growth, operating margin and cash flow, led by solid business across all geographies and strong performances in verification and custom IC."


On October 26, 2006 Magma Design Automation, Inc reported financial results for its second quarter of fiscal 2007, the period ended October 1, 2006. Total revenue for the quarter was $42 million, an increase of 5.2% from the $40 million in the third quarter of 2005, and a 2.4% increase from the $40.9 million in the just-prior quarter. The $42 million in revenue was at the midpoint of the guidance given last quarter. License revenue was $35 million, accounting for 83% of total revenue. This was an in increase of 6.6% year-over-year, and a rise of 1% sequentially. Services revenue was $7.1 million, accounting for 17% of total revenue. This was a 17% increase year-over-year, and an 11% increase sequentially.

However, net loss for the quarter was $12.4 million, compared to net loss of $6.6 million a year earlier and compared to a loss of $10.7 million in the just-previous quarter. Litigation expenses related to patent litigation with Synopsys were $1.2 million in the quarter.

Rajeev Madhavan, chairman and CEO of Magma, said, "We met or exceeded all our key financial targets for the second quarter. Our new offerings have been well received and we saw strong performance among all businesses and all regions."


On October 26, 2006 Mentor Graphics Corporation announced the financial results for the third quarter, the period ended September 30, 2006. Total revenue for the quarter was $191 million, an increase of nearly 16% from the $165 million a year earlier ,and a nearly 7% increase from the $178 million in the just-prior quarter. Revenue from Systems and Software was $114 million, accounting for 60% of total revenue, a year-over-year increase of 25%, and a 13% increase sequentially. Revenue from Service and Support was $76 million, accounting for 40% of total revenue, an increase of 4% year-over-year, and a drop of 1.3% sequentially.

In the quarter, the Americas accounted for 45% of total revenue, Europe 25%, Japan 18% and Pac Rim 12%.



Walden C. Rhines, chairman and CEO of Mentor Graphics, said, “Like the EDA industry overall, Mentor continues to see the effects of strengthening EDA demand in 2006. Customer reaction to our next-generation emulation product and Calibre nm platform has strengthened our long-term growth outlook.”

Gregory K. Hinckley, president of Mentor Graphics, added, “Our automotive business scored an important win in the quarter with a standardization decision at Ford for the Capital Harness tool set. The deal, which closed in the third quarter, has already opened many other doors at key Ford suppliers and partner companies.”


On November 29, 2006 Synopsys, Inc. reported financial results for its fourth quarter and the fiscal year, the period ended October 31, 2006. Total revenue for the quarter was $283 million, an increase of 11% from the $254 million in the same quarter a year earlier, and a 2.2% increase from the $277 million in the just-prior quarter. Time Based License (TBL) revenue was $229 million, accounting for 81% of total revenue. This was a 19% increase year-over-year, and over a 2% increase sequentially. Up-front license revenue was $14 million, accounting for only 5% of total revenue, nearly completing Synopsys' strategy in recent years of shifting from up-front software licensing to TBL. The $14 million in up-front revenue was a decrease of 12% year-over-year and nearly 1% sequentially. Maintenance and service revenue was $39.5 million, accounting for almost 14% of total revenue. This was a decrease of 13% year-over-year but an increase of 4% sequentially.

From a product perspective, 50% of revenue came from core Galaxy design, 24.5% from Discovery verification solutions, 9% from IP, 12% from DFM, and almost 5% came from professional services.



From a geographic point of view, North America accounted for 52% of total revenue, Europe 16%, Japan 17% and Asia Pacific 15%. North American revenue increased 9% year-over-year and 1% sequentially. European revenue increased 9% year-over-year, but declined almost 4% sequentially. Revenue from Japan grew almost 21% year-over-year, and 7% sequentially. Revenue from Asia Pacific grew 12% year-over-year, and 7.5% sequentially.

Synopsys' net income for the quarter was $9.4 million, a substantial turnaround from the net loss of $13.5 million in the same quarter a year earlier, and an increase of 24% from the $7.6 million in the just-previous quarter.

For the fiscal year 2006 Synopsys reported total revenue of $1,096 million, a 10% increase over the $992 million in fiscal 2005. TBL revenue of $874 million accounted for 80% of total revenue, an increase of nearly 18% year-over-year. Maintenance and service revenue was $157 million, accounting for 14% of total revenue. This was a drop of 16%. Up-front license revenue was $63 million, a slight increase of 4%. Net income for the fiscal year was $24 million, compared to a net loss of $15.5 million in fiscal 2005.

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