The EDA and the Electronics IP Almanac: Q4 2010

By the time Mentor execs estimated Q4 2010 results 3 months ago, they were a somewhat more aggressive, suggesting $900 million for the 2010 revenue and $0.19 for the EPS.

For nominal Q4 2010 alone, the company reported revenues of $307.31 million, up a colossal 29.56% from the $237.14 million nominal fourth quarter of the prior year, GAAP net income of $ 49.155 million in Q4 2010 vs. $39.367 million in Q4 2009 [+22.99%], and GAAP earnings per share of $.43, up 10.26% from the $0.39 the prior fourth quarter. (Indeed, the Q4 earnings of Q4 2009 contained a tax benefit of $19.576 million, representing nearly half of the earnings total in Q4 2009).

Only three months ago, Mentor had issued such robust guidance for nominal Q4 2010 that it seemed hard to believe at the time: revenue of “about” $293 million, and GAAP EPS of $0.40.  In fact, both predictions issued only 3 months earlier turned out to be slightly conservative!

“Driven by over 40% year-over-year bookings growth in our core system design business, Mentor set an all-time revenue record this past year, growing the fastest of the ‘Big 3’ EDA companies,” said Dr. Walden C. Rhines, CEO and chairman of Mentor Graphics.

 

 

“Mentor’s decade-long emphasis on investment in system design software has driven us to a near-50% market share in printed circuit board design (PCB) software and an operating margin percent for PCB software that is twice that of the overall company.” [2]

We expect this momentum to continue in this fiscal year as we achieve over 9% growth in Mentor’s revenues and a much greater percentage growth in earnings,”
Dr. Rhines concluded.

During the quarter, the company teamed up with ARM to provide an automated memory test and repair solution for ARM embedded memories and processor cores. Mentor also combined Veloce® hardware emulation technology with equipment from Rohde and Schwarz, the largest test and measurement supplier in Europe, to deliver a hardware accelerated debug platform for wireless communication systems-on-chip. The company collaborated with IBM, GLOBALFOUNDRIES and Samsung to design a test chip for 32nm and 28nm IC manufacturing technologies, using the Mentor® Olympus-SoCTM place and route system and the Calibre® physical verification and design for manufacturing platform. Mentor’s leading-edge products continued to receive endorsements from customers such as Broadcom, Infineon, Siemens, Fujitsu and Cypress Semiconductor.

In December, the company announced the acquisition of assets of CodeSourcery, a leading provider of open source tool chains and services for advanced embedded systems development. CodeSourcery software enables customers to maximize the performance of hardware platforms ranging from embedded devices to supercomputers.

“Cost controls remain an intense focus at Mentor Graphics,” said Gregory K. Hinckley, president of Mentor Graphics.

 

 

“We have reduced SG&A expense as a percent of revenue by five hundred basis points over the last two years, and are on track to reduce it another two hundred basis points this fiscal year. We are committed to continue to further reduce SG&A expense over the next several fiscal years.”

Outlook

For nominal Q1 2011 (the fiscal first quarter ending April 30, 2011), the company expects revenue of about $225 million, and GAAP earnings per share of about $.06. For the full year 2011, the company expects revenues to be approximately $1 billion, and GAAP earnings per share of approximately $.77. This represents a 9% growth in revenue.

Mentor Graphics self description

Mentor Graphics Corporation (NASDAQ: MENT) is a world leader in electronic hardware and software design solutions, providing products, consulting services and award-winning support for the world’s most successful electronics, semiconductor and systems companies. Established in 1981, the company reported revenues over the last 12 months of about $850 million. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web site: http://www.mentor.com/.

 

 


On February 16, 2011 Synopsys, Inc. (NASDAQ: SNPS) reported results for the first quarter of its fiscal year 2011 (which we call nominal Q4 2010).

For nominal Q4 2010, Synopsys reported revenue of $364.64 million, compared to $330.17 million for the same quarter last year, an increase of 10.44%. However, the revenue of $364.64 million for Q4 2010 was down 2.89% from the just prior nominal Q3 2010’s $375.5 million .  

Guidance for nominal Q4 2010 provided 3 months ago called for revenue between $360 million and $368 million, showing once more that when some 90% of a company’s revenue comes from backlog, accuracy in revenue guidance is a relative breeze.

"Synopsys began its fiscal year with a strong quarter, putting us well on-track towards meeting our objectives," said Aart de Geus, chairman and CEO of Synopsys. 



"With a backdrop of a healthy semiconductor industry, we continue to deliver strong technology with our traditional EDA solutions, while achieving meaningful scale with our solutions in higher-growth adjacencies."

GAAP Results  

On a generally accepted accounting principles (GAAP) basis, net income for nominal Q4 2010 was $48.226 million, or $0.31 per share, compared to $132.786 million, or $0.88 per share, for nominal Q4 2009 (recall, however, that that the Q4 2009 net income included a one-time $91.6 million, or $0.61 per share, tax benefit associated with the IRS settlement for fiscal years 2002-2004, announced back on January 12, 2010). Q4 2010’s $49.226 million net income exceeded the just prior nominal Q3 2010 net of $25.5 million by 93.04%. Synopsys’ earnings guidance provided 3 months earlier called for a nominal Q4 2010 EPS between $0.21 and $0.28.

Financial Targets

Synopsys also provided its financial targets for the nominal Q1 2011 and for the full year ending January 2012.  These targets do not include future acquisition-related expenses that may be incurred.  These targets constitute forward-looking information and are based on current expectations.  

Nominal Q1 2011 Targets:

  • Revenue: $386 million - $394 million
  • GAAP expenses: $319 million - $338 million
  • Other income and expense: $0 - $2 million
  • Fully diluted outstanding shares: 150 million - 155 million
  • GAAP earnings per share: $0.26 - $0.31
  • Revenue from backlog: greater than 90%

The Year-Ahead Targets:

  • Revenue: $1.5 billion - $1.525 billion
  • Other income and expense: $1 million - $5 million
  • Fully diluted outstanding shares: 149 million - 154 million
  • GAAP earnings per share: $1.03 - $1.20
  • Cash flow from operations: approximately $230 million - $250 million

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