On May 17, 2006 Synopsys, Inc. reported the financial results for its second quarter, the period ended April 30, 2006. Total revenue for the quarter was $275 million, an increase of 12.5% over the $244 million in the same period a year ago, and an increase of 5.5% from the $260 million in the previous quarter. Time Based License revenue was $209 million, accounting for 76% of total revenue. This was an increase of 19% year-over-year, but a slight decrease of almost 1% sequentially. Revenue form up front licenses was $25 million, or 9.4% of total revenue. This was an increase of 51% year-over-year, and a 210% increase sequentially. Revenue from Maintenance and Service was $39 million, accounting for 14% of total revenue. This was a drop of 23% year-over-year and a drop of over 3% sequentially.
From a product perspective, 75% of revenue came from core Galaxy design and Discovery verification solutions, 20% came from IP and manufacturing businesses, and 5% came from professional services.
Geographically, Japan and North America were the strongest regions in the quarter in terms of orders. Revenue distribution reflected the very strong business in Japan, which came in at 18% of revenue. North America was 54%, Europe was 15%, and Asia Pacific came in at 13% of revenue. Year-over-year NA revenue was up 14%, Europe 5.5%, Japan 20% and AP 4.4%.
One Synopsys customer accounted for more than 10% of revenue in its second quarter.
Vicki Andrews, Synopsys' head of Sales, will be leaving the company next month to spend time with her family. Best wishes, Vicki!
Aart de Geus, chairman and CEO of Synopsys, said, "Q2 was yet another very solid quarter. For the third quarter in a row, business came in notably above our targets, and our technology continues to demonstrate strong momentum. This outstanding performance was driven by all our product groups, but especially implementation, analog and digital verification, and design for manufacturing. We also executed very well against our financial goals, meeting or exceeding all our financial targets and making good progress on our operating margin."
On April 25, 2006 Synplicity, Inc. reported results for the first quarter, the period ended March 31, 2006. Total revenue was $14.5 million, a slight decrease from the $14.6 million in the first quarter of last year, and an 11% decrease from the $16.3 million in the just prior quarter. License revenue was $7.1 million, accounting for 49% of total revenue. This was a decrease of 11% from the $8 million in the same quarter a year ago, and a 20% decrease sequentially from $8.9 million. Maintenance revenue was $7.4 million, accounting for 51% of total revenue. This was an 11% increase year-over year, and essentially flat compared to the previous quarter.
Net income for the quarter was $1.2 million, up 129% from the $515,000 in the year ago quarter, and a 55% decrease form the $2.6 million in the just prior quarter. Charges against earnings included $854,000 in restructuring charges and stock-based compensation expense of $961,000.
Gary Meyers, president and CEO of Synplicity, said, "During Q1 we made important progress in several areas. We are confident that our decision to withdraw from the cell-based and structured ASIC markets will produce greater returns in our core areas of business. Synplicity has been the leading provider of FPGA synthesis tools for the past five years and by redeploying our R&D investments, we will strengthen our core products and enable long term growth and increased shareholder value. Additionally, I am pleased to report that we experienced strong order growth during the quarter, including several large multi-year customer agreements. We believe this is an indication of a growing perception of our product leadership within the customer base."
EDA versus MCAD
The detailed quarterly performances of a selected group of public MCAD Vendors has been provided in the authors' May 2006 MCAD Commentary recently published on MCADCafe.
The three top mechanical CAD companies (Autodesk, Dassault Systemes and UGS) sported revenues of $1,017 million in Q1 2006, 30% more than the $779 million in revenue for the top three EDA companies (Cadence, Synopsys and Mentor Graphics). The MCAD vendors also generated 3 times the amount of earnings. MCAD earnings were 6.6% of revenues, compared to 2.7% for the EDA vendors. See Table 7 below.
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 Group & Individual Stock Performance in Q1 2006
As shown in Tables 7 and 8 and Figure 3 below, the combined quarterly stock prices for the EDA vendors were up 13% year-over-year in absolute dollars and 0.6% in average percentage change. This is only slightly ahead of the 11% rise in average price for the three leading stock indexes. Ansoft is the growth leader at +54%. Cadence and Synopsys had over 20% year-over-year growth. LogicVision and Mentor Graphics had significant declines of 27% and 19%, respectively.
The combined stock prices on a sequential basis rose 0.6% in absolute dollars, an average price increase of about 0.1%. Cadence was the biggest gainer at 34%. Synopsys was a distant second at 14%. LogicVision and Mentor had about a 30% sequential decline in stock price. The three major stock indexes rose an average of just under 6% from the prior quarter.
Forecast Guidance from Individual EDA Providers
The combined forecast for the next quarter is $868 million, an increased of 8% year-over-year, but less than 1% increase sequentially. Ansoft is the only firm to forecast a year-over-year quarterly drop. Mentor is the most optimistic, with 14% year-over-year projected growth. On a sequential basis, Synplicity and Synopsys expect more than 5% growth. Ansoft and Magma forecast significant declines relative to the quarter just reported.
Individual Company by Company Guidance
Altium gave no guidance.
For guidance Ansoft expects revenue on the next quarter to be between $16.5 million and $17 million, compared to the $24.7 million in the quarter just completed and $22 million in the same quarter last year. However, Nicholas Csendes, Ansoft's President and CEO, said, "For the next fiscal year, we anticipate continued revenue growth of around 10-15%."
For the second quarter of 2006, Cadence expects total revenue in the range of $340 million to $350 million. This compares to $328 million in the quarter just completed and $321 million in the same quarter a year earlier. For the full year 2006, the company expects total revenue in the range of $1.41 billion to $1.46 billion, a rise of almost 8% compared to $1.33 billion in 2005.
For Magma 's fiscal 2007 first quarter, ending July 2, 2006, the company expects total revenue in the range of $38 million to $42 million. This compares to $44 million in the quarter just completed, and to $39 million in the same quarter last year.
For the second quarter, Mentor Graphics expects revenue of approximately $177 million. This is slightly above the $176 million in revenue for the quarter just completed, and 14% above the same quarter a year ago. For full year 2006, the company expects revenue of about $762 million, compared to $705 million in fiscal 2005.
As guidance Synopsys expects revenue in the next quarter to be in the range of $270 million to $278 million. This compares with revenue of $275 million in the quarter just completed, and to $252 million a year earlier. More than 90% of revenue will come from backlog. The firm expects revenue for the full fiscal year to be in the range of $1,075 million and $1,090 million.
For guidance Synplicity expects revenue for the next quarter to be in the range of $15.1 million to $15.6 million. This compares to $14.5 million in the quarter just completed. Revenue for 2006 is expected to be in the range of $63 to $65 million, a decrease from prior guidance, as a result of the business refocus on FPGA synthesis tools. This compares to $61.9 million in 2005.
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