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

Over the last five (5) months, the valuations of the G4 EDA vendors have each improved. See the chart below which compares Market Caps of each vendor on March 31, 2009 and August 27, 2009. Synopsys rose modestly, while the others saw significant improvements.

MCAD versus EDA Q2 2009

The detailed second quarterly performances of a selected group of public MCAD Vendors have been provided in the authors' MCAD Commentary for August 2009, recently published on MCADCafe. (Go to MCADcafe.com and scroll down the left-hand column of photos to the link). As Table 12 below reveals, the combined Q2 revenue from the top three MCAD vendors was $1.064 billion, 44% more than the $738 million combined revenue from the top 3 EDA vendors. Total MCAD earnings were $49 million with all three vendors in the black. Total EDA earnings were a net loss of $48.2 million with only Synopsys in the black.

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.

Forecast Guidance from Individual EDA Providers

The combined forecast for the next quarter from the four EDA vendors providing guidance calls for a dip of -5% from the third quarter last year. Magma is the most pessimistic with a forecast of -21%. The others foresee single digit declines. On a sequential basis, Cadence is the only firm to project revenue growth at almost 3%. Magma and Mentor foresee a flat quarter. Synopsys projects an almost -2% dip.

As guidance Cadence expects total revenue for the third quarter to be in the range of $210 million to $220 million, compared to $209 million in the quarter just reported and compared to $232 million in the same quarter a year ago. For the full year 2009, the company expects total revenue in the range of $830 million to $870 million.

Kevin S. Palatnik, senior vice president and chief financial officer, added, “Our second quarter results demonstrate that we are reducing costs, improving profitability, and positioning the company for long term growth with excellent progress on our transition to the 90/10 model.”

As guidance for the next quarter, Magma expects total revenue in the range of $28.5 million to $29.0 million, essentially flat compared to $28.8 million in the quarter just reported, and a -21% drop from the $36.5 million in the same quarter last year.

As guidance, Mentor Graphics expects revenue in the next quarter to be around $183 million, compared to the same $183 million in the quarter just reported, and compared to $185 million in the same quarter a year earlier.

As guidance Synopsys expects revenue in the next quarter (fourth quarter of fiscal 2009) to be in the range of $335 million to $343 million. This compares to $345 million in the quarter just reported and compares to $353 million in the same quarter a year ago. Revenue for the full year is expected to be in the range of $1.357 billion to $1.365 billion, compared to $1.337 billion a year earlier.

EDA Consortium Market Statistics

On July 15, 2009 the EDA Consortium Market Statistics Service (MSS) announced that the EDA industry revenue for Q1 2009 declined 10.7% to $1,192 million, compared to $1,334 million in Q1 2008. The four-quarter moving average declined 11.3%.

In the first quarter of 2009 the CAE segment accounted for 36% of the total EDA revenue, IC Design & Verification for 25%, Semiconductor IP for 20%, PCB/MCM for 10% and Services for 9%. All product sectors suffered declines except Services which rose 24%. CAE declined 19%. IC Design & Verifications and PCB/MCM dropped by single digit percentage points.

For the first quarter of 2009 North America accounted 41% of total EDA revenue, Europe for 19%, Japan for 22% and Rest-of-World for 18%. All geographies declined by percentages in the mid teens relative to the year ago quarter except the Asia/Pacific (APAC) region which rose 11.5%.

Dr. Walden C. Rhines, EDA Consortium chair and Mentor Graphics CEO and chairman, said, “The business environment remained difficult for EDA as for other industries, with Q1 (2009) EDA revenues declining in all regions except Asia Pacific. Nevertheless, for Q1, the overall decline was less than for the previous quarter.”


Note: Readers of the above EDA Industry Commentary for August 2009 may also be interested in the Electronics IP Industry Commentary. The most recent issue was published on August 18, 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 SEPTEMBER 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 eighty-one (81) 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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