Commentary: EDA Industry View May 2003 - Is a Major Upturn Near?

Based on market capitalization, we see once again in Figure 4 that the three leaders in both EDA and MCAD, when combined, represent but a small part of the software industry and, of course, an even smaller part of the entire technology sector.

Moreover, with the exception of Dassault Systemes, none of the six EDA/MCAD companies above is doing particularly well on ROE compared to the U.S. software & programming industry average, or even compared to the entire U.S. technology sector average in general - at least for the last year. (But don't forget - it's the leverage these EDA and MCAD vendors provide to their customers that is their appeal.)

How about the Q1 2003 performances of the EDA group?

In Q1 2003, two of the three largest EDA vendors, Mentor Graphics and Synopsys, had major quarterly revenue up-ticks year-over-year. Mentor Graphics was up 24 percent. Synopsys turned in a whopping 57 percent increase in the quarter ending April 30, 2003, easily leading the pack (see Figure 5). However, Cadence revenues were off 26% compared to the same quarter last year.

The seven smaller companies also produced mixed results, with Magma delivering an excellent 26 percent up-tick in year-over-year quarterly revenue; Nassda, Synplicity, and Verisity showing slightly improved revenue results year-over-year; Altium and Ansoft showing slight declines; and TransEDA enduring a drastic drop.

Relative to earnings per share (EPS), Mentor Graphics and Synopsys were understandably in the black in Q1 2003, but Cadence was in the red. However, only three of the seven smaller companies were able to show black ink (Magma, Nassda and Verisity) in Q1 2003.

Outlook for Q2 2003 and the rest of the year?

What are the management teams for these EDA companies saying lately about the rest of 2003? Some of their comments are listed below, paraphrased from recent company news releases as these companies contemplated their futures ("Notes" in parentheses are those of this author):

"Cadence will continue to execute with the financial discipline needed to respond to market dynamics when the market improves. Ours is the most complete technology design portfolio in the world, and now it's the most advanced as well. For Q2, the company expects total revenue in the range of $265 to $275 million (Note - this would be ~5 percent growth). GAAP EPS is expected to be in the range of 0 to 1 cent. For the full year 2003, GAAP EPS is expected to be in the range of 12 to 17 cents" (Note - no full year 2003 revenue estimate was provided).
Cadence News Release April 15, 2003

"For the current quarter (ending June 30, 2003), Mentor Graphics forecasts revenues of $156 million to $162 million (Note - flat with Q1) and GAAP earnings of 2 cents to 7 cents a share. Mentor repeated its full-year 2003 forecast, which calls for revenue of $665 million (Note - this would be 112% of 2002) and GAAP earnings of 39 cents a share. Analysts' current estimate is for 2003 earnings, excluding items, of 50 cents a share on revenue of $665.7 million."
Reuters News Release April 24, 2003

"Synopsys continues to exhibit strong financial discipline, despite a turbulent economic backdrop. Looking forward, we will continue to manage the company for steady revenue and earnings growth in 2003. Synopsys announced its operating model targets for the quarter ending April 30, 2003 and the full fiscal year. These targets assume the completion of the proposed acquisition of Numerical Technologies, Inc., before March 31, 2003, which is subject to a number of conditions, including receipt of regulatory clearances. Quarter ending April 30, 2003 targets: Revenue: between $275 million and $289 million; Earnings before goodwill (EBG): between $0.67 and $0.72 per share. Fiscal year 2003 targets: Revenue: between $1.130 - $1.180 billion (note - this would be 127% of Fiscal 2002); Earnings before goodwill (EBG): between $2.95 - $3.10; and subscription license duration: 3 - 3.25 years.
Synopsys News Release February 19, 2003

"Despite a tough economic backdrop, our second quarter (ending April 30, 2003) was the largest orders quarter in Synopsys' history. We are pleased with the Company's current momentum and look forward to achieving strong financial results during the remainder of fiscal 2003. Synopsys announced its operating model targets for the quarter ending July 31, 2003 and for full year fiscal 2003. Qtr revenue: $288 - $303 million; Total expenses: $207 - $214 million; Earnings per share: $0.77 - $0.82. Fiscal Year 2003 targets: Revenue: between $1.130 - $1.180 billion; Earnings per share: $2.95 - $3.10 (Note - same targets as forecast 3 months ago).
Synopsys News Release May 21, 2003

"With three quarters of results to draw on, the company now believes that revenue for the 2003 financial year (ending June 2003) will fall in the range of Australian dollars 45m-48m (US$ 24.7 million - 26.4 million)1. This revised revenue range is in line with the lower end of the company' s previous revenue estimates. Despite tough conditions, industry reports show that we have actually increased market share in the PCB segments of our business and hold a strong competitive position in our industry. From our investments in a broad range of technologies over the past three years, we are now poised to deliver a new line of electronic design tools. Whist we do not expect significant revenue contribution from this product line in the short term (12-18 months), we are confident that it will drive the performance of the business over the next three to five years."
Altium News Release April 10, 2003

"We had another quarter (ending January 31, 2003) of strong sequential sales improvement (Note - the quarter was down 12 percent year over year). Despite the challenging environment, we are confident that the strategic decisions and technological advancements we have made this year will return Ansoft to growth and profitability in the coming year and beyond." (Note - results of quarter ending April 30, 2003 will not be announced until May 28, 2003).
Ansoft News Release February 19, 2003

"We're pleased to announce such solid financial results this quarter (ended March 31, 2003), especially given the current economic climate. For the business outlook for Magma's fiscal 2004 first quarter which will end June 30, 2003, the company expects total revenue in the range of $21.5 million to $23.5 million (Note - would be ~124 percent quarterly growth versus a year ago quarter). GAAP EPS is expected to be in the range of $0.04 to $0.08 (Note - up from ~zero)."
Magma News Release April 29, 2003

"Although we remained profitable this quarter, we did not achieve our goals as many customers reduced or delayed their spending to control their own operating expenses and improve their bottom line results. Despite the change in customers' spending behavior, we intend to continue to improve our competitive position and productivity. We are committed to helping our customers to weather through the tough economic times and make their complex products successful. Moving forward, we do not yet see any meaningful improvements in our customers' spending pattern for the balance of fiscal 2003. As a result, we expect revenue of approximately $7.0 million and fully diluted earnings per share of approximately $0.00 for the quarter ending June 30, 2003. For fiscal 2003 (ending September 30, 2003), we now expect revenue of approximately $33.9 million to $34.1 million (Note - almost zero growth from previous fiscal year) and net income of $0.11 to $0.12 per fully diluted share (Note - well down from previous year)."

Review Article Be the first to review this article
Downstream : Solutuions for Post processing PCB Designs


Featured Video
R&D Hardware Electrical Engineering Associate for Applied Research Laboratories UTA at Austin, Texas
Digital Design Engineer for Cirrus Logic, Inc. at Austin, Texas
IC Design Verification Engineer for Coherent Logix at Austin, Texas
Upcoming Events
Design and Verification Conference and Exhibition (DVCon) at DoubleTree by Hilton San Jose 2050 Gateway Place San Jose CA - Feb 25 - 28, 2019
Geodesign Summit 2019 at Redlands CA - Feb 25 - 28, 2019
Mobile World Congress 2019 at Fira Gran Barcelona Spain - Feb 25 - 28, 2019
WTS 2019 at London United Kingdom - Mar 12 - 13, 2019

Internet Business Systems © 2019 Internet Business Systems, Inc.
25 North 14th Steet, Suite 710, San Jose, CA 95112
+1 (408) 882-6554 — Contact Us, or visit our other sites:
AECCafe - Architectural Design and Engineering TechJobsCafe - Technical Jobs and Resumes GISCafe - Geographical Information Services  MCADCafe - Mechanical Design and Engineering ShareCG - Share Computer Graphic (CG) Animation, 3D Art and 3D Models
  Privacy PolicyAdvertise