EDA Industry Update February 2006 -- What did the Last Quarter Bring?

For the "calendar" year 2005, the big three EDA vendors again lead the pack. Cadence had 39% of the total, Synopsys 30% and Mentor Graphics had 21%. Combined these three firms accounted 90% of the total revenue. Magma was a distant fourth at 5%.

Stock Prices for the Year

Forecast Guidance from Individual EDA Providers

The combined forecast for the next quarter is $836 million, an 8% increase over the same period a year ago but a drop of 23% compared to the historically-strong year ending quarter in 2005.

Individual Company by Company Guidance

Altium gave no guidance

As guidance Ansoft expects revenue in the next quarter to be in the range of $24 million to $25 million, compared to $19.7 million in the quarter just reported and $21.7 million in the same quarter last year.

As guidance Cadence expects total revenue for the first quarter of 2006 to be in the range of $315 million to $325 million, compared to $378 million in the quarter just completed and $292 million in the first quarter of 2005. For the full year 2006, the company expects total revenue in the range of $1.400 billion to $1.450 billion. This compares to $1.3 billion in the year just completed.

As guidance Magma expects revenues in the next quarter to be in the range of $39 million to $43 million compared to $41 million in the quarter just reported and compared to $46 million in the first quarter of 2005.

For the first quarter of 2006, the Mentor Graphics expects revenue of approximately $170 million, compared to $221 million in the quarter just completed and compared to $164 million in the first quarter of 2005. For the full year 2006, the firm expects revenue of about $755 million, compared to $705 million in the year just completed.

As guidance Synopsys expects revenue in the next quarter to be in the range of $262 million to $270 million, compared to $260 million in the quarter just completed and compared to $244 in the same quarter a year ago. The firm expects more than 90% of revenue to come from backlog. Synopsys revenue target for its 2006 fiscal year is between $1,055 million and $1,085 million compared to $992 million in fiscal 2005.

As guidance Synplicity expects revenue in the next quarter to be in the range of $14.6 million to $15.1 million, compared to $16.2 million in the quarter just completed and compared to $14.6 million in the same quarter in the prior year. The firm expects revenue for 2006 to be in the range $66 to $68 million, weighted towards the second half of the year, in alignment with its product release schedule. This compared to $71 million in 2005.

EDA Consortium's Market Statistics

On December 20, 2005 , the EDA Consortium's Market Statistics Service (MSS) announced that entire EDA industry revenue for Q3 of 2005 was $1,122 versus $1,062 million in the third quarter of 2004, an increase of 5.5%.

During Q3 2005, CAE accounted for 42% of the total revenue, IC Design and Verification for 27%, PCB and MCM for 7%, Semiconductor IP for 18% and Services for 6%.

During Q3 of 2005, North America accounted for 47% of total revenue, Europe for 19%, Japan for 22% and ROW for 11%.

Walden C. Rhines, chairman of the EDA Consortium and chairman and CEO of Mentor Graphics Corporation, said, "Total EDA license and maintenance grew a solid 6% in the third quarter to $851 million. The industry strength was broad-based, with all regions up, as well as nearly all product segments."

The EDA Consortium is the international association of companies that provide tools and services that enable engineers to create the world's electronic products. EDA is the critical technology used to design electronics for the communications, computer, space technology, medical and industrial equipment and consumer electronics markets among others.

Geopolitical & Economic Factors:

The EDA Industry is just one of many thousands of industries affected by geopolitical and economic factors around the world. Here in the United States, the last five years have resulted in far more than a baker's dozen enervating political and economic factors: (1) unremitting extravagance and unwarranted tax cuts in the face of the shift from US federal budget surplus to deep deficit, (2) the definite long-term trend of a rich-get-richer, poor-get-poorer US income distribution, (3) sluggish net job growth below the requirements of US population increases, (4) a net US disadvantage in globalization, (5) weakened US environmental stewardship and deteriorating US infrastructure, (6) the ballooning real and psychic costs of war, in lives and treasure, (7) reduced worldwide and domestic admiration for US leadership, with an astonishing lack of accountability, (8) the weaker US dollar, (9) elevated energy, oil & gas prices, (10) a deteriorated domestic NASDAQ market vs. 2001, (11) ongoing corporate fraud, (12) indictments and criminal investigations in both the White House and Congress, (13) double-digit rises in the cost of US health care and ongoing increases in the number of US uninsured, (14) stunning US federal incompetence (disaster relief, Medicare drug plan, nation building, ...), (15) reduced US civil liberties and personal privacy, (16) unrelenting illegal immigration, and (17) record US trade deficits, requiring the US to borrow billions of dollars every week from abroad.

As reported by the San Francisco Chronicle, the final tally is in as of February 12, 2006, for item (17) above, the US Trade Deficit for the full year calendar 2005:

Almost everything about running a national trade deficit is bad. Among them: Countries that allow huge trade deficits can become too dependent on their creditors' good will, leading those debtor nations to federal decisions not in the debtors' national security interests.


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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 three dozen. During his corporate career, Henke operated sequentially on "both sides" of 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 Fellow of ASME International.

An affiliate of the HENKE ASSOCIATES team since 2001, LA-based Dr. John R. (Jack) Horgan co-authored this article. Jack's career has included executive positions at Applicon, Aries Technology, CADAM and MICROCADAM, as well as a stint at IBM.

Since May 2003 the authors have now published a total of thirty-eight (38) independent articles on MCAD, PLM, EDA and Electronics IP on IBSystems' MCADcafe and EDAcafe. Further information on HENKE ASSOCIATES, and URL's for past Commentaries, are available at
http://www.henkeassociates.net .

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