Commentary: Electronics IP Industry - An August 2008 Update

On a sequential basis Virage Logic was the percentage growth leader at +24% followed by MoSys at over +12% stock price growth. LogicVision had the largest decline at -26%, followed by Rambus at -18%.

Forecast Guidance from Individual IP Providers

Six of the G7 gave guidance for the next quarter. The combined forecast calls for 3.2% revenue growth year-over-year, and nearly 2% sequentially. Rambus was the only firm to forecast a decline relative to the same quarter last year. MIPS is the most bullish with a forecast of almost 26% revenue growth, with Virage Logic and Ceva projecting growth at around 15%.

Individual Company by Company Guidance

For guidance ARM said “We enter the second half of 2008 with a broad product portfolio for licensing into an increasingly diverse customer base; an opportunity pipeline expected to deliver near-term license revenue and good royalty momentum across the business. We therefore reiterate the guidance for FY 2008 given in both February and April; assuming no further deterioration in the trading environment, we continue to expect to increase dollar revenues in FY 2008 by at least the growth rate achieved in FY 2007.

As in prior years, Q4 revenues are expected to be stronger than Q3 revenues based on normal seasonal impacts on development systems revenues in the third quarter and the typical strength of license and royalty revenues in the fourth quarter.”

As guidance CEVA expects third quarter revenue to be in the range of $9.5 million to $10.5 million, compared to $10.1 million in the quarter just reported, and compared to $8.7 million in the third quarter of last year. For the year CEVA expects revenue in the range $39 million to $41 million, and net income of $2.5 million. This is unchanged from prior forecasts.

As guidance LogicVision anticipates revenue in the next quarter to be in the range of $3.0 million to $3.2 million, compared to $3 million in the quarter just reported, and compared to $3.0 million in the third quarter of 2007. Net loss is expected to be in the range of $600,000 to $800,000.

As guidance MIPS expects revenue in the next quarter to be in the range of $27 million to $29 million, compared to $28.9 million in the quarter just reported, and compared to $22.3 million in the same quarter last year.

MoSys did not provide guidance.

As guidance Rambus anticipates revenue in the next quarter to be in the range of $27 million to $31 million, compared to $35.7 million in the quarter just reported, and compared to $41.7 million in the third quarter of 2007.

As guidance Virage Logic expects revenue in the next quarter to be in the range of $15 million to $15.5 million. This compares to $15 million in the quarter just reported, and compares to $13.1 million in the same quarter a year ago.

EDA Consortium's Market Statistics
On July 3, 2008 the EDA Consortium's Market Statistics Service (MSS) announced that the EDA industry revenue for Q1 2008 declined 1.2% to $1,350 million, versus $1,367 million in Q1 2007. The four-quarter average growth rate, which compares the most recent four quarters to the same four quarters in the prior year, was up 5.9%.

In the first quarter of 2008, the CAE segment accounted for 40% of total EDA revenue, IC Design & Verification for 24%, Semiconductor IP for 20%, PCB/MCM for 10% and Services for 6.5%.

For the first quarter of 2008 North America accounted for 42% of total EDA revenue, Europe for 20%, Japan for 24% and ROW for 14%.

Dr. Walden C. Rhines, EDAC chair and Mentor Graphics CEO and chairman, said “Weakness in the large EDA companies was partly offset by strength in startups, with resulting numbers that were slightly down year over year. Main areas of strength were in leading-edge technologies such as electronic system level design, design for manufacturing, design for test, IC layout verification, IC/ASIC power analysis, and RF/ mixed-signal design.”


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About the Authors of this Electronics IP Commentary:

Since 1996, Dr. Russ Henke has been president of HENKE ASSOCIATES, a San Francisco Bay Area high-tech business & management consulting firm. The number of client companies for Henke Associates now numbers more than forty. During his corporate career, Henke operated sequentially on "both sides" of MCAE/MCAD and EDA, as a user and as a vendor. He's a veteran corporate executive from Cincinnati Milacron, SDRC, Schlumberger Applicon, Gould Electronics, ATP, and Mentor Graphics. Henke is a Fellow of the Society of Manufacturing Engineers (SME) and served on the SME International Board of Directors. He is also a member of the IEEE and a Life Fellow of ASME International. In April 2006, Dr. Henke received the 2006 Lifetime Achievement Award from The CAD Society, presented by CAD Society president Jeff Rowe at COFES2006 in Scottsdale, AZ. In February 2007, Henke became affiliated with Cyon Research's select group of experts on business and technology issues as a Senior Analyst. This Cyon Research connection aids and supplements Henke's ongoing, independent consulting practice (HENKE ASSOCIATES).

An affiliate of the HENKE ASSOCIATES team since 2001, LA-based Dr. John R. (Jack) Horgan co-authored this June 2008 EDA Industry Commentary. Dr. Horgan's prior corporate career has included executive positions at Applicon, Aries Technology, CADAM and MICROCADAM, as well as a stint at IBM. Dr. Horgan is also an editor of EDAcafé Weekly.

Since May 2003 the authors have now published a total of sixty-seven (67) independent articles on MCAD, PLM, EDA and Electronics IP on IBSystems' MCADCafé and EDACafé. Further information on HENKE ASSOCIATES, and URL's for past Commentaries, are available at March 31, 2008 marked the 12th Anniversary of the founding of HENKE ASSOCIATES.

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