Commentary: EDA Industry Update – March 2010 What did the Last Quarter Bring?

Retreating from a small profit in the just preceding quarter, Magma reported a net loss of $(2.6) million, or $(0.05) per share (basic and diluted), for the quarter ended January 31, 2010, compared to a net loss of $(77.8) million, or $(1.72) per share (basic and diluted), for the year-ago quarter.

In the third quarter of fiscal 2010, Magma generated cash flow from operations of approximately $4.0 million.

"Magma performed very well in the (fiscal) third quarter, continuing a string of quarters where we beat our revenue guidance and generated cash," said Rajeev Madhavan, Magma chairman and CEO. "Our products in physical verification, circuit simulation and analog/mixed-signal design are showing good momentum that we believe position us for significant bookings growth."

Business Outlook:

For Magma's fiscal 2010 fourth quarter, ending May 2, 2010, the company expects total revenue in the range of $32.5 million to $33.0 million. GAAP net loss per share is expected to be in the range of $(0.09) to $(0.08). For Magma's fiscal year 2010, ending May 2, 2010, the company expects total revenue in the range of $122.0 million to $122.5 million, compared to the previous guidance range of $120.0 million to $125.0 million.

On March 4, 2010 Mentor Graphics Corporation (NASDAQ:MENT) announced results for its fiscal fourth quarter and full year ending January 31, 2010.

For the fiscal fourth quarter, the company reported revenues of $237.1 million, up over 25% compared to the just prior quarter, but down 2.4% from the year-over-year quarter ended January 31, 2009. (Three months ago, the company expected to recognize about $230 million in fourth quarter revenue as guidance).

GAAP earnings per share of $.39 in this last quarter compared favorably to $0.33 per share on a diluted basis in last year's Q4. (Three months ago, the company expected to achieve GAAP EPS of only $0.33 in the fourth quarter as guidance).

For the full fiscal 2010 year, the company reported revenues of $802.7 million, up 2% from the $789 million in fiscal 2009, and a GAAP loss per share this year of $.23, down from a loss per share of $.99 the prior year.

During the quarter, the company extended its Catapult® C Synthesis product to support the SystemC design language, allowing designers a richer set of choices in doing system level design. The company also launched its Tessent™ YieldInsight™ product, which allows customers to use integrated circuit production fault data to understand where those faults are physically located on the chip, thus allowing them to be corrected.

EDA Commentary readers are encouraged to sift through the detailed profile on happenings at the Mentor Graphics Mechanical Analysis Division posted in EDA Weekly on from December 07, 2009 to December 22, 2009, and available permanently at the following URL:

“The electronics industry recovery seems to be well underway, and we are increasingly optimistic about the business environment in the coming year,” said Dr. Walden C. Rhines, CEO and chairman of Mentor Graphics. “The company's focus on its product segments with number one market share, as well as investments in new product categories, continue to show strong results, as the average dollar value of renewals in the top ten contracts in the fiscal fourth quarter grew 25% over the prior contract values.”

“Our strong emphasis on cost controls throughout fiscal 2010 has positioned us well,” said Gregory K. Hinckley, president of Mentor Graphics. “An improving currency environment, good performance in our new and emerging product segment and recovery in our base business all point to a better year in fiscal 2011.”

Business Outlook:

For the fiscal first quarter ending April 30, 2010, the company expects revenues of approximately $180 million and break-even to a loss per share of $.05, on both a GAAP and non-GAAP basis.

For the full year fiscal 2011, ending January 31, 2011, the company expects revenues to grow around 5%.

On February 17, 2010 Synopsys, Inc. (NASDAQ:SNPS) reported results for the quarter ending January 31, 2010. Synopsys achieved revenue of $330.2 million in that quarter, down nearly 3% compared to $339.8 million for the corresponding quarter a year ago. (The $330.2 million in revenue was within the revenue range given as guidance 3 months ago).

On a GAAP basis, net income for the quarter ending January 31, 2010 was $132.8 million, or $0.88 per share, compared to $52.4 million, or $0.37 per share, for the corresponding quarter ending January 31, 2009.

By the by, net income for the just closed quarter includes a one-time $91.6 million, or $0.61 per share, tax benefit associated with the IRS settlement for fiscal years 2002-2004, announced on January 12, 2010. (This possible tax benefit was mentioned in guidance 3 months ago).

"Synopsys started the year with solid momentum," said Aart de Geus, chairman and CEO of Synopsys. "We met or exceeded our financial targets, and made a number of strategic moves that we believe will increase our total available market substantially in the long term."

Business Outlook:

Synopsys provided financial targets for its next quarter ending April 30, 2010 and for the full fiscal year ending October 31, 2010. These targets do not include future acquisition-related expenses that may be incurred during 2010.

Next Quarter Targets :
  • Revenue: $331 million to $339 million
  • GAAP expenses: $278 million to $295 million
  • GAAP earnings per share: $0.22 to $0.28
  • Revenue from backlog: greater than 90%
Full-Year Targets:
  • Revenue: approximately $1.33 billion to $1.35 billion
  • GAAP earnings per share: $1.55 to $1.74
  • Cash flow from operations: $200 million - $220 million

EDA Vendor Stock Performances

Table 3 below reveals that the combined total of the G4 stocks fell over 4% in value during calendar Q4 2009, while both the NASDAQ and the DOW gained value of about 7%. Over the course of calendar 2009 year, however, the combined G4 stock total outpaced the NASDAQ'S remarkable growth, but barely (45.1% to 43.9%).

Only MAGMA grew its per share value over the course of calendar Q4 2009, and MAGMA more than doubled its per share price over the 2009 calendar year (+126.5%). CADENCE and MENTOR both outpaced the NASDAQ during calendar 2009. SYNOPSYS grew nicely from a much larger base to begin the year (+20.3%).

* ALTIUM (ALU:ASX) shares priced in Australian dollars. Not included in totals.

Table 4 provides a snapshot of the behavior of the G4 stock prices since the end of calendar 2009 through March 11, 2010. Mentor Graphics is the only one of the four that has given up some value since late December 2009. The combined G4 total price has not kept up with the NASDAQ Composite, and the G4 total Market Cap has remained flat.

EDA Big 3 vs. MCAD Top 3 Vendors

In past Commentaries, we have compared the most recent quarter's revenues and net incomes of the Big 3 EDA vendors (Cadence, Mentor, Synopsys) to those of the Top 3 MCAD vendors (Autodesk, Dassault, PTC).

For the nominal fourth quarter of 2009, the following totals apply:

* These numbers contain the Synopsys Q4 $91.6 million tax benefit.

EDA Consortium's Market Statistics

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