Commentary: EDA Industry Update February 2007 -- What did the Last Quarter Bring?


Commentary: EDA Industry Update February 2007 -- What did the Last Quarter Bring?

by Dr. Russ Henke and Dr. Jack Horgan
Henke Associates

In May 2003, December 2003, February 2004, August 2004, December 2004, February 2005, May 2005, August 2005, December 2005, February 2006, May 2006, August 2006 and December 2006 EDA Commentaries by the authors (published on EDACafé.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 February 2007 report covers their performances for both the nominal Fourth Quarter 2006 and the full year 2006.

In this issue, EDA News Highlights are followed by the revenue & earnings performances of the selected group of EDA players for Q4 2006 and the year 2006, and then EDA vendor by vendor details. EDA Vendor stock prices are discussed. Finally, individual EDA vendor forecasts for Q1 2007 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 and hence have been dropped from explicit coverage the authors' quarterly EDA Commentaries.

Recent EDA News Highlights

Two up to date views of the same ongoing controversy:

On January 31, 2007 Synopsys, Inc. announced that the United States District Court for the Northern District of California has ruled that Synopsys is the sole owner of the '114 Patent in the litigation between Synopsys and Magma Design Automation. The Court further ruled that Synopsys and IBM are co-owners of the '446 and '438 Patents. Magma has also been ordered to transfer to Synopsys and IBM a number of additional patent applications that had been pending throughout the world.

David Stanley, Magma corporate vice president, Corporate Affairs, said in Magma's press release on the same court ruling, "As the facts came to light in this case it became clear that IBM, one of Magma's technology partners, contributed to the technology in these two patents and is therefore a rightful owner.” He added that because Magma and IBM granted each other rights to their respective EDA patents in a 2004 licensing agreement, Magma therefore has rights to use the '446 and '438 patents.

On February 21, 2007 Synopsys announced that Magma Design Automation has requested that the Court dismiss all antitrust claims against Synopsys. In return, Synopsys would agree not to pursue Magma for malicious prosecution or any other claims related to making these anti-competitive accusations against Synopsys. The Court has been asked to dismiss all of these claims 'with prejudice,' meaning they cannot be revived.

Five patent claims remain at issue between Synopsys and Magma. The trial to review these claims is scheduled for June 2007.

At the end of January 2007, both IBM and Intel separately announced a new technology called "high-k metal gate” that will dramatically reduce transistor-gate leakage current which has been a major obstacle in moving to new processor nodes.

Gordon Moore, Intel co-founder, said in a statement, "The implementation of high-k and metal materials marks the biggest change in transistor technology since the introduction of polysilicon gate MOS transistors in the late 1960s.” Intel believes it has a lead of more than a year over the rest of the semiconductor industry with the first working 45nm processor of its next-generation family of products. Intel has replaced silicon dioxide with a thicker hafnium-based high-k material in the gate dielectric. Intel has also developed new metal gate materials.

IBM has been working with partners AMD, Sony and Toshiba. IBM has inserted the technology into its manufacturing line in East Fishkill, NY and will apply it to products with chip circuits starting in 2008. The creation this transistor component with the new material was accomplished without requiring major tooling or process changes in manufacturing.

IBM also announced a new memory technology - embedded Dynamic Random Access Memory (DRAM) or eDRAM as a replacement for SRAM (Static Random Access Memory) that would fit on the chip as opposed to being off-chip as DRAM usually is. eDRAM is smaller than an equivalent amount of SRAM. Therefore more of this memory could be placed on a chip.

Since the previous EDA Industry Commentary was published in December 2006, the world lost an authentic pioneer in electronic design automation and integrated circuit design. A. Richard Newton, professor and dean of the College of Engineering at the University of California, Berkeley, passed away on January 2, 2007, less than two months after being diagnosed with pancreatic cancer. He was only 55 years old.

In addition to his academic prowess, Dr. Newton played an active role in the EDA industry, helping to found a number of today’s design technology companies including SDA Systems (now Cadence Design Systems), Synopsys, PIE Design Systems (now part of Cadence), Simplex Solutions and Crossbow.

One of Dr. Newton’s many other legacies will be the UC Berkeley-based Center for Information Technology Research in the Interest of Society (CITRIS). Dr. Newton was the driving force behind the founding of CITRIS in 2001, to develop the next generation of technologies that will be critical to sustaining California's economic growth and global competitiveness and to solving society's most critical needs.

Dr. Newton will be sorely missed.

On a happier note, it is gratifying to note that Al Gore won an Academy Award on Oscar Night in LA February 25, 2007, for the best documentary film of the year, “An Inconvenient Truth”. Gore’ film encourages everyone around the world to help solve the problems of global warming and climate change. Gore is best remembered here as having won the popular ballot for president of the United States in November 2000 by more than 500,000 votes, only to have the US Supreme Court install George W. Bush instead.

After that Pandora’s Box was opened, the country has arguably been going in the wrong direction ever since. The US stock market plunge of February 27, 2007 does make one wonder if the chickens are finally coming home to roost (deep federal deficits, record trade deficits, unrelenting/unsuccessful wars, the housing slump, ballooning energy prices, chronic declines in US manufacturing, exorbitant health care costs, government indictments and corporate fraud, unrestricted illegal immigration, …). The list seems endless. The United States cannot keep going in the wrong direction without paying the piper at some juncture. Indeed, many economists put the probability of a US economic recession in 2007 at about one in five (remember Q2-Q3 2001?). This Commentary is going to press on the evening of February 27; let’s hope today’s stock market losses were just temporary blips. But fundamentally, the country’s overall direction has to change, and soon.

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