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


Net income for the quarter was $5.2 million, a 41% increase from the $3.7 million in the year ago quarter, and a 35% increase from the $3.9 million in the just previous quarter.

Nicholas Csendes, Ansoft's President and CEO, said, “We are pleased to report strong revenue and earnings growth for the second quarter. For the balance of the fiscal year, we expect continued revenue growth of around 10-15%."


On October 24, 2007 Cadence Design Systems announced financial results for the third quarter, the period ended September 30, 2007. Total revenue for the quarter was $400 million, an increase of 9.5% from the $366 million in the third quarter last year, and an increase of 2.5% from the $391 million in the second 2007 quarter. The $400 million was in the middle of the guidance given last quarter. Product revenue was $274 million, accounting for 68% of total revenue, a year-over-year increase of 12%, and a 3.8% increase sequentially. Maintenance revenue was $96 million, accounting for 24% of total revenue, an increase of almost 10% year-over-year, and a 1.6% increase sequentially. Service revenue was $31 million, or nearly 8% of total revenue, a decrease of almost 9% year-over-year and a decrease of 4.8% sequentially.

Functional Verification accounted for 20% of total revenue, Digital IC Design 27%, Custom IC Design 32%, DFM 6%, System Interconnect 7% and Services 8%.



On a geographic basis, North America accounted for 41% of total revenue, Europe 25%, Japan 22% and Asia 12%. On a year-over-year basis revenue from North America was down 17%, from Europe up 24%, from Asia up 19% and up 85% from Japan. On a sequential basis revenue from North America was down 19%, from Europe up 51%, from Japan up 61% but down 28% from Asia.

On July 12, 2007 Cadence announced that it had acquired Invarium, Inc., a San Jose-based developer of advanced lithography-modeling and pattern-synthesis technology. Pattern synthesis capabilities enable superior pattern resolution and faster yield ramp for designs targeted to 45-nanometer-and-below process technologies. The acquisition was completed on July 10, 2007. Terms of the agreement were not disclosed.

On August 16, 2007 Cadence announced that it had acquired Clear Shape Technologies, Inc., a DFM technology company specializing in design-side solutions to minimize yield loss for advanced semiconductor ICs. The acquisition was completed on August 15, 2007. Terms of the agreement have not been disclosed.

Net income for Cadence for the quarter was $73 million, a handsome increase of 73% from the $31 million in the same quarter a year ago, and a 22% increase from the $60 million in the previous quarter.

For Silicon Valley individuals interested in learning about Brazil's exciting career and business opportunities, an informational session was held at Cadence San Jose on October 31, 2007, chaired by Ms. Wendy Reeves Dunn. Dr. Augusto Gadelha, Secretary to Brazil's Ministry of Science and Technology (MCT) and Cadence CEO Mike Fister shared a common vision with attendees-enabling Brazil to become a world-class center for IC design.

In the quarter approximately 50% of Cadence's product business was represented by ratable licenses. This was lower than the historical rate because of a higher mix of term contracts. An important factor which contributed to a higher level of term business in Q3 was the use of “eDAcards”. This is a form of contract that enables customers to draw down product licenses from a self-serve, real-time system so that they are able to better match their project license demand with purchased license capacity. The infrastructure for eDA Cards is proprietary and provides Cadence and customers with excellent visibility into their project needs and utilization. Customers also have the ability to draw down licenses of differing time durations, each priced accordingly, until they exhaust their purchased capacity. Cadence's initial experience has been that customers draw down the licenses faster with eDA Cards, than with the traditional contract types.

Mike Fister, president and CEO of Cadence, said, "Our cross platform solutions, such as low power and logic design team, are gaining traction. At the same time, we're seeing momentum in the uptake of our Virtuoso platform upgrade."

Bill Porter, executive vice president and chief financial officer, added, "It was another good quarter for achieving our primary operating metrics-revenue, operating profitability and cash flow."


Magma Design Automation, Inc. reported on the financial results for their second quarter of fiscal 2008, the period ended September 28, 2007. Total revenue for the quarter was $53.5 million, a 27.5% increase from the $42 million in the same quarter last year, and a 6.6% increase from the $50 million in the prior quarter. The $53.5 million in revenue was a record and above the high end of the guidance given in the previous quarter. License revenue was $35.6 million, or 67% of total revenue, an increase of 48% year-over-year. Bundled license and service revenue was $9.2 million, a 17% increase year-over-year, but a 4.6% drop from the prior quarter. Services revenue was $8.6 million, or 16% of total revenue, an increase of 21% year-over-year and a 1.4% increase sequentially.

Seventy-six percent of revenue came from backlog-related transactions and twenty-four percent came from up-front orders completed in the quarter. This compares to fourteen percent of revenue from up-front transactions in Q1.

On a geographic basis, North America accounted for 59% of total Magma revenue, Europe 8%, Japan 27& and Asia Pacific 6%.



Net loss for the quarter was $6.4 million, down considerably from the loss of $12.4 million in the year ago quarter, and the $11.2 million loss in the prior quarter.

Magma also announced that Toshiba Corporation has successfully completed the deployment of Magma's integrated implementation software in Toshiba Electronics Europe GmbH (TEE). With this deployment, Magma's toolset becomes a common implementation platform used across Toshiba worldwide design groups in Japan, the U.S. and Europe. Since Toshiba America Electronics Components, Inc. (TAEC) began using Magma's implementation tools several years ago, Toshiba has taped out more than 100 designs for communications, digital TV, graphics and low-power mobile applications, including designs at 65 nm.

Rajeev Madhavan, chairman and CEO of Magma, said, “In Q2 we delivered another quarter of record revenue and continued to improve our profitability. The success of our new products is enabling us to increase our presence with long-time customers and establish share in markets where we traditionally did not compete. Looking back at the first half of fiscal 2008, we have executed as expected.”


On November 29, 2007 Mentor Graphics Corporation announced financial results for the third quarter, the period ended October 31, 2007. Total revenue for the quarter was $186 million, a decrease of 2.3% from the $191 million in the third quarter of last year, and a decrease of 9.4% from $206 million in the prior quarter. System and software revenue was $1.4 million, accounting for 56% of total revenue, a decrease of 9% year-over-year and a decrease of almost 16% sequentially. Service and support revenue was $82 million, or 44% of total revenue, an increase of 7.8% year-over-year and essentially flat on as sequential basis.

On November 5, 2007 Mentor had announced that it expected revenue to be approximately $185 million, versus original guidance for the 3rd quarter of $200 million, and Mentor also had announced that non-GAAP earnings were expected to be slightly below break-even. In explaining the shortfall Walden C. Rhines, chairman and CEO of Mentor Graphics said, “Revenue was short of guidance because unique circumstances on several large bookings caused revenue to lag bookings by a quarter. Because we see this revenue deferred by only a quarter, Mentor reaffirms its fiscal 2008 and 2009 outlook.”

In the quarter, revenue from America accounted for 41% of total revenue, from Europe 25%, from Japan 19% and from the Pacific Rim 14%. American revenue was down nearly 11% year-over-year, and down almost 32% sequentially.

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