Tanner EDA, Twenty Years and Counting

That’s a really great question and one that I don’t hear very often from people outside the company but of course inside there is keen interest inside the firm. We decided long ago when we started issuing stock options with no intention of going public or being acquired, that we had to provide a liquidity path. We decided on a formula for evaluating our stock that is based upon our revenue. So as our revenue has grown over the years, the value of the stock has grown. At any point, anyone can compute the value based upon our recent revenue number, what the stock is worth is, if they chose to cash out. We cash them out directly from our company coffers. The stock remains owned by the employees. In fact, the employee stock options comes with the restriction that if they leave the company for any reason, the company has the right to buy back their stock according to this formula price, so that we retain employee ownership of the company.

The original intention was not to go public or to sell the company. Is that position likely to change in the future?
I have not seen any reason to change it. It is possible that at some point, a change in the market or my energy level will change but right now, it is a lot of fun. There are tremendous challenges and lots of opportunities. We have really dedicated ourselves to becoming a broad line supplier that is consistent with not going public or selling out. The traditional CAD success story that you hear about is a company that comes in and makes a niche product, best-of-breed, but does a very narrow range of the whole tool flow. If they are successful, they manage to sell themselves to one of the Big Three. That has never been our strategy. We are attempting to make the best integrated product, a suite of tools that work very well with one another because they are all engineered from the ground up to work together as opposed to our big competitors whose tools suites have grown through acquisition. The attempts are made after the fact to have them work together. Those attempts do not always work out that well. We have really focused our entire effort on a suite of tools, an ever expanding suite, that always work well together.

How challenging has it been over the 20 years to attract and retain talent when other companies are offering stock options with a view to going public or being acquired?
At times it has been incredible challenging. In the late nineties, the 2000 era, during the dot.com boom, we were having to give big raises and were still losing people. But today, a lot of EDA companies are struggling. Our folks are very happy to stay put. Over the years, we have managed to have a very low turnover rate. We provide an environment where people get to do their creative thing. They are well paid. They are not upset by a lot of turmoil associated with the EDA companies, the volatility of their stock prices, the acquisitions, the cutbacks and things like that. We have a very stable environment where people do great work. They see the results of their work in the fantastic things our customers are doing. It all makes for a very fun place to work.

What are the factors that have contributed to your success, to the 20 years and growing more that 20% per year?
We always felt that the key is analog deign rather than digital design as these customers are all unique. The design challenges that they face are unique. We try to make tools that do not get in the way of their creativity being applied to the job. When they encounter anything beyond the tool, we have a strong application engineering team. Customers can call and get help. If the AEs can’t help, they pass it along to the developers. A lot of our new features and some of the completely new tools are based upon customer requests. The teacher customer has been very helpful to us. These are people really pushing the envelope of analog design and yet willing to work with us to improve the tools because they need them. That has been one of the keys to our success. It does not seem like a magic formula but we hear over and over again that the other EDA companies do not behave like this. Once the sale is made, it is often difficult for customers of our competition to get a return call. We of course try to minimize the problems our customers have by careful design of the product in the first place but when those problems inevitably occur, our support staff is incredible in terms of wading in and finding out what is necessary to get the customer going again.

One of the keys from a technology standpoint was that early on was unpopular was that we believed in the PC as a platform at a time when dedicated UNIX workstations were perceived to be the way to go We stuck with that and found that gradually the Intel processor overcome the dedicated UNIX workstation. That war is over now and we are very glad because it has produced a platform that over the years more and more powerful and at the same time less expensive. It also allows the customer all the things they need to do besides design. They have to write reports, do spread sheets, and make PowerPoint presentations. They can do all of that on the same computer that they are doing chip design. With our software running under windows they can input chip layouts into the PowerPoint presentations; things like that. Of course, one of our recent announcements in the last few months is the release of our full suite of software running on Linux. While we still expect Windows to be our primary customer platform, for those who insist on Linux, we have that covered as well.

Who do you see as your primary competition?
In some arenas it is Cadence, Mentor and Synopsys. But I think the biggest competition is people just not being aware of us. In some areas we work well with the other competitors. For example, Mentor had a number of customers come to them who wanted to use the Calibre design rule checking but wanted to review the results of errors in our tools. So Mentor approached us and asked if we could make an interface between the two tools, which we did. We introduced that as a separate product. In some cases we compete with the big guys and in some cases we align with them.

Are there any smaller companies that Tanner goes head to head with?
There used to be a company called IC Editors. They went out of business a year or so ago. We do not bump into them often. Silvaco has sort of an intermediately priced suite that we sometimes go head to head with. In Taiwan there is a product called Linker by Silicon Canvass. They are a very tough competitor in Taiwan but not much outside Taiwan. That’s about it in terms of competitors. Even then we have a broader tool suite than either of these other two. So if we can get the word out about the breadth of our tools, we often come out on top.

The major obstacle for Tanner to grow even faster is primarily a marketing one, getting the word out, and you have just hired a president whose forte is marketing and sales.
Yes! He is going to be building up the marketing staff. Apart from the new president, the number of marketing people we have at the moment is zero. I think it says something for our company that we have been able to do as well without much in the way of marketing. It is also kind of sad that people do not know about the tools that are available.

Where did Greg Lebsack come from?
He came from the software industry not the EDA industry. He was previously CEO of ASP Open System. In three years he doubled their revenue and increased their profitability by 1500%. So we are hoping he can do the same for us.

Editor: Previously, Greg was the CEO of ASP Global Services
(Chatsworth, CA), a leading provider of software-as-a-service (SaaS) supply chain software. Prior to joining ASP Global Services, Greg worked for Sprint where he held several management positions. He is also a board member of the Technology Council of Southern California.

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Reviews:
Review Article
  • informative article June 02, 2009
    Reviewed by 'Ganesh K'
    I really thankful to Jack Horgan for interviewing such a great company founder. Whole article is really informative and gives a good view of Tanner. The question like stock option is really good one. I appriciate work done by Jack and hope will able to see more stuff.

      2 of 2 found this review helpful.
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