So the 'Big 3' EDA Vendors will remain the 'Big '3 for the time being.
However, the entire EDA Industry is under a lot of pressure these days, and some form of consolidation and/or restructuring will likely occur sooner rather than later.
On June 26, 2008 the Global Semiconductor Alliance (GSA) released the CYQ1 2008 version of its Global Semiconductor Financial Report. This quarterly report includes detailed trend analysis on financial data for fabless, IDM, pure-play foundry, intellectual property, electronic design automation, design service and back-end sectors. Worldwide semiconductor revenue totaled $67.3 billion in CYQ1 2008, rising only 0.2% quarter-over-quarter, but 5% year-over-year. Fabless revenue totaled $13.4 billion, which grew 16% year-over-year and equated to 20% of the semiconductor sales total. The top 10 fabless companies by first quarter revenue combined for $7.8 billion, or 58% of total fabless revenue (see Table 1 below):
On August 4, 2008 the Semiconductor Industry Association (SIA) reported that global sales of semiconductors for the first half of 2008 grew to $127.5 billion, an increase of 5.4% over the first half of 2007 when sales were $121 billion. Sales in the second quarter were $64.7 billion, an increase of 3% over first quarter sales of $62.8 billion. Thus far, it appears that increased energy costs have had little impact on demand for electronic products that drive semiconductor usage. SIA President George Scalise said, “Key demand drivers for semiconductors - especially personal computers, which account for 40% of semiconductor sales, and mobile phones, which drive about 20% of demand - continued to show double-digit unit growth.” He added, “In 2008, developing countries - with sales of over 153 million units - will account for half of worldwide PC sales. In mobile phones developing countries are expected to account for 66% of total worldwide unit sales.”
The SIA's Global Sales Report (GSR) is a three-month moving average of “sales activity” tabulated by the World Semiconductor Trade Statistics (WSTS) organization, which represents approximately 66 companies. The moving average for the second quarter shown in Table 2 below has the Americas accounting for only 16% of “sales activity”, Europe very slightly behind, Japan accounting for over 18% and Asia Pacific accounting for over 50%:
How did the EDA Vendors fair during the Second Quarter of 2008?
As shown in Table 3, the combined revenue performance of the five EDA firms for the quarter was $916 million, down 5% from the $965 million in the second quarter of 2007, but up nearly 7% sequentially. Altium was the percentage revenue growth leader year-over-year at 47%, with the far larger Synopsys a distant second at 13%. Both Cadence and Mentor Graphics suffered double-digit declines, while Magma fell almost 9% year-over-year.
Turning to earnings performances in Q2 2008, Table 4 shows that the EDA group of 4 that reported quarterly income, delivered reported combined income of $30 million, or 3.3% of revenue. This represents a precipitous 60% drop compared to net income of $75 million in the year ago quarter. However, the $30 million is a considerable improvement over the combined net loss of $14 million in the just prior quarter. By the way, Synopsys' Q2 2008 net income,which “carried” the other three selected vendors that reported quarterly earnings, benefited from a one-time tax benefit of $17.3 million in Q2 2008.
Company by Company Q2 2008 details:
When expressed in $US, the US accounted for 51% of total Altium revenue, Europe 30%, and Asia Pacific for 20%. See Table 5.
For the entire fiscal year, Altium enjoyed revenue of $53.1 million, a 25% increase over the $42.4 million in the previous year. Software license revenue was $34.7 million, a year-over-year increase of 15%. Maintenance and Software Assurance revenue was $14.4 million, an increase of 51%. Net loss for this year was $2.8 million, a change of minus 357% from the net gain of $1.1 million the year before.
On August 14, 2008 Altium announced the appointment of André Pravaz (previously a non-executive director) to the executive position of Global Head of Sales. Prior to joining Altium's board, André spent eight years with Autodesk, Inc. as Vice President South Asia Pacific and was Managing Director of Compuware Asia Pacific Pty Limited for three years.
Emma Lo Russo, Altium President & Chief Operating Officer, “We are pleased to see the investment we made in our organization's development and senior management team in the first half of the financial year, deliver very strong sales and revenue growth in the second half of the year. Whilst we delivered strong sales growth, we did not meet our (fiscal) Q4 targets as outlined in early April. Following our slower than expected revenue growth, we have reviewed our models to lower our operating costs in the new financial year relative to what we communicated with shareholders in April. With the expected growth in sales to continue across all regions, we expect to generate strong results for the 2009 financial year.”
On July 23, 2008 Cadence Design Systems reported its financial results for the second quarter, the period ended June 30, 2008. Total revenue for the quarter was $329 million, an almost 16% drop from the $390 million in the comparable year ago quarter, but an almost 15% rise from the $287 million in the just prior first quarter. The $329 million was above the high end of the revenue guidance given last quarter.
Q2 2008 product revenue was $195 million, accounting for 59% of total revenue, a decrease of 26% year-over-year, but a 25% increase sequentially. Maintenance revenue was $100 million, 30.5% of total revenue, an increase of over 6% year-over-year, and an increase of 1.6% from the previous quarter. Services revenue was $33.7 million, accounting for 10% of total revenue, an increase of 2.7% from the second quarter of 2007, and an increase of 4.7% from the prior quarter.
Revenue from North America accounted for 49% of total revenue, revenue from Europe 21%, from Japan 18% and from the rest of Asia 12%. On a year-over-year basis, revenue from North America was down almost 21%, from Europe revenue was up 4%, from Japan up over 8%, and from the rest of Asia down 40%.
In terms of functional areas Functional Verification accounted for 25% of total revenue, Digital IC Design for 23%, Custom IC for 26%, DFM for 7%, System Integration for 9% and Services for 10%. See Table 6.