EDA Industry Update JUNE 2009 -- What did the Last Quarter Bring?

In an understatement, Aart de Geus, chairman and CEO of Synopsys, said, "Synopsys continues to execute well in an environment that still shows signs of economic stress. Customers are choosing Synopsys for its strong technology, global support, continued investment in the future, and financial strength."

EDA Vendor Stock Performances

The combined stock prices of the G5 EDA vendors fell over 42% in absolute terms and fell an average of over 35% year-over-year. All of the G5 stock prices tumbled. Magma was the largest decliner at -92% while Cadence and Mentor Graphics fell 62% and 51%, respectively. Synopsys provided the best stock price year-over-year performance by far; nevertheless, it still dropped over 9%.

On a sequential quarterly basis, the G5 EDA stocks rose almost 5% in absolute terms but dropped 5.2% on average. Cadence and Synopsys enjoyed good increases at 11.5% each. Altium and Magma dropped over 20%, while Mentor declined nearly 16%.

The G5 EDA stock performances compare to a year-over-year decline of 37% for the average of the major indexes and a decline of 10.6% versus the previous quarter.

MCAD versus EDA Q1 2009

The detailed first quarterly performances of a selected group of public MCAD Vendors have been provided in the authors' MCAD Commentary for May 2009, published on MCADCafe on May 28, 2009. As Table 12 below reveals, the combined Q1 2009 revenue from the top three MCAD vendors was $1,054 million, or 43% more than the $757 million combined Q1 2009 revenue of the top three EDA vendors. On the earnings side, the MCAD vendors had a combined net income of $66 million compared to a net loss of $28 million for the EDA firms. All of the MCAD companies generated net income in Q1 2009, while two of the EDA firms reported net losses.

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 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. Also, remember that Siemens PLM Software (previously UGS), a leading MCAD vendor, is now part of Siemens and does not disclose its financial performance.

The valuations of the G4 EDA vendors have each improved over the last two months save for Synopsys, which has given up a mere 3.7% of its elevated valuation. See the chart below which compares Market Caps of each vendor on March 31, 2009 and June 02, 2009:

Note: Synopsys is still (June 02, 2009) worth 1.4 times as much as Cadence and Mentor Graphics combined.

Another note: The top 3 MCAD companies (Autodesk, Dassault and PTC) combined are worth 2.43 times as much as the Big Three EDA vendors combined.

Forecast Guidance from Individual EDA Providers

The combined forecast for the next quarter from the four EDA vendors providing guidance calls for a drop of nearly 17% compared to the same quarter last year, but a dip of only 2.8% from the quarter just reported. Compared to a year ago Cadence and Magma are the most pessimistic forecasting a drop of around 37%. Mentor sees a drop of over 9%, while Cadence projects about the same. On sequential basis, Magma and Mentor foresee a percentage decline in the mid teens, while Synopsys and Cadence see a modest uptick.

EDA Consortium's Market Statistics

On April 7, 2009 the EDA Consortium Market Statistics Service (MSS) announced that the EDA industry revenue for Q4 2008 declined 17.7% to $1318.7 million, compared to $1602.7 million in Q4 2007. The four-quarter moving average declined 9.4%.

In the fourth quarter of 2008 the CAE segment accounted for 38.1% of the total EDA revenue, IC Design & Verification for 22.5%, Semiconductor IP for 21.7%, PCB/MCM for 10.3% and Services for 7.5%. CAE and IC D&V each declined over 24% while Services shot up 25% and SIP rose nearly 8%. See Table 14.

For the fourth quarter of 2008 North America accounted 43.2% of total EDA revenue, Europe for 22%, Japan for almost 20% and Rest-of-World for 15%.

Walden C. Rhines, EDA Consortium chair and Mentor Graphics CEO and chairman. Said “Declines in CAE, IC Physical Design & Verification, and PCB/MCM resulted in an overall decline for Q4, 2008. For Q4, the double-digit drop occurred in all regions except Western Europe, which showed an 8.4 percent decline.”


Note: Readers of the above EDA Industry Commentary for June 2009 may also be interested in the Electronics IP Industry Commentary. The most recent issue was published on May 10, 2009 and may be found at this URL:

Comments? Feedback? Tell us what you think about this topic, or share any additional information you may have on the subject! Submit your comments to: EDACafe-Editor.

About the Authors:

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 2009 EDA 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 seventy-eight (78) 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
http://www.henkeassociates.net . March 31, 2009 marked the 13th Anniversary of the founding of HENKE ASSOCIATES.

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