Commentary: EDA Industry Update March 2008 -- What did the Last Quarter Bring?
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Commentary: EDA Industry Update March 2008 -- What did the Last Quarter Bring?

Commentary: EDA Industry Update March 2008 -- What did the Last Quarter Bring?


by Dr. Russ Henke and Dr. Jack Horgan
Henke Associates


In the May 2003, December 2003, February 2004, August 2004, December 2004, February 2005, May 2005, August 2005, December 2005, February 2006, May 2006, August 2006, December 2006, February 2007, May 2007, August 2007 and November 2007 EDA Commentaries by the authors (published on EDACafé.com), the then-current yearly and quarterly financial performances of a selected group of publicly traded Electronic Design Automation (EDA) companies were analyzed and compared. Expectations regarding the future financial performances of these same EDA entities were documented as well. The selected companies were Altium, Ansoft, Cadence, Magma, Mentor Graphics, Nassda, Synopsys, Synplicity and Verisity.

This March 2008 report covers their performances for the nominal Fourth Quarter of 2007 and the calendar year 2007.

In this issue, EDA News Highlights are followed by the revenue & earnings performances of the selected group of EDA players for Q4 2007, and then EDA vendor by vendor details. EDA Vendor stock prices are discussed. Revenue & earnings performances for the calendar year are then presented. Finally, individual EDA vendor forecasts for Q1 2008 are provided. Enjoy!

Note: As part of continuing EDA industry consolidation, two previously-selected EDA vendors, namely Verisity and Nassda, have been acquired by others and hence have been dropped from the authors' quarterly EDA Commentaries.


EDA News Highlights

The potential war in high definition formats between Sony's Blue-ray and Toshiba' HD-DVD that threatened to replay the BetaMax vs VHS war, is over. Toshiba announced recently that it would cease building machines to play its HD DVD video format, effectively ending a battle between the two rival technologies.

Walt Disney, Sony Pictures, Twentieth Century Fox, and MGM had backed Blue-ray exclusively. Universal and Paramount had been backing HD DVD. Warner Brothers Entertainment had been producing both formats, but in early January it announced that will create high-definition movies discs only in Blue-ray format.

In simple terms, Blue-ray had more capacity, but it was more expensive per player and per disc. The fact that Sony's Playsation3 could play movies in the Blue-ray format helped make it more popular. Blue-ray also supports a more sophisticated anti-copying scheme, a digital rights management (DRM) than that offered by HD DVD. This was attractive to content producers.


On January 10. 2008 the Global Semiconductor Alliance (GSA, formerly FSA) released the CYQ3 2007 version of its Global Semiconductor Fundings and Financials Report. Q3 2007 semiconductor revenue totaled $71.9 billion, with fabless and IDM revenue accounting for 20% and 80% of the Q3 2007 semiconductor sales total, respectively.

North American semiconductor companies represented 52% of revenue, followed by Asia with 37%, Europe with 11% and India with less than 1%.

The top 15 semiconductor companies by CYQ3 2007 revenue accounted for $42.3 billion, or 59% of total semiconductor revenue.


On March 03, 2008, The New York Times reported that Intel recently revealed a family of processors "intended to power what it hopes will foster the development of a new category of compact, low-cost wireless Internet computers." The Intel Atom "is different from other chips found in today's mobile devices because it is intended for the netbook applications, giving it faster performance and lower power consumption." The Wall Street Journal added that, with the ultra-small chips, Intel is "hoping to drive demand for two emerging categories of computing devices." The Atom has two variants: One, "previously known by the code name Silverthorne, is designed to be the calculating engine for pocket-sized gadgets that" the company "calls MIDs, for mobile Internet devices. The other chip to carry the Atom brand, code-named Diamondville, is designed for low-end laptop and desktop computers expected to cost around $250." Reuters explained that the "Atom processor is based on a new microarchitecture designed for small devices and low power consumption." Atom "is less than 25 square millimeters, and 11 of the chip's dies -- the slivers of silicon with 47 million transistors each -- would fit in an area the size of a US penny." Silverthorne and Diamondville "are made on Intel's 45 nanometer chipmaking technology and slated for introduction toward the middle of this year."

How did the EDA Vendors fair during the Fourth Quarter of 2007?

As shown in Table 1, the combined revenue performance of seven selected EDA vendors was $1.173 billion, an increase of 10.7% from the $1.077 billion in the fourth quarter of 2006, and an increase of 16.4% from the $1.008 billion in the third quarter of 2007. The 16.4% collective sequential growth was significantly boosted by Mentor's low Q3 2007 performance. All seven EDA vendors improved revenue both year-over-year and sequentially.

On a year-over-year quarterly basis, Magma and Synplicity were the percentage revenue growth leaders, with increases above 20%. Ansoft, Mentor and Altium delivered percentage increases in the mid-teens. On a sequential basis, Mentor was the runaway percentage leader at 53% growth, owing in part to its relatively low Q3 2007, with Altium a strong second at 44% on a far smaller base. Ansoft and Cadence exhibited low double digit percentage growth, while Synopsys was flat.



Figure 1 above and Figure 2 below provide additional revenue comparisons among vendors. Cadence was number one in revenue share for Q4 2007 at 39%, Synopsys number 2 at 27% and Mentor Graphics number 3 at 24%. As usual the big three EDA oligopoly accounted for just over 90% of total Q4 2007 revenue of the selected group of seven EDA vendors. Magma was a distant fourth at 5%.



Turning to earnings performances in Q4 2007, Table 2 shows that the EDA group of six (Altium does not report earnings quarter-by-quarter) reported a combined net income of $213 million, amajor increase of 119% from the $97 million in the fourth quarter of 2006, and a 103% increase from the $105 million in the just prior quarter. All but Magma had net income in the fourth quarter of 2007, and all the vendors managed increased earnings relative to both the same quarter last year and the just prior quarter. On a year-over-year basis, Synplicity was the percentage growth leader at 549% on a tiny base. Cadence's earnings performance was far more impressive (147% increase) on a far larger earnings base. Third place went to Synopsys at a 99% increase. On a sequential basis, Mentor had the largest earnings turnaround, going from a net loss of $9.1 million to a net gain of $36 million. Synplicity was again the percentage growth leader at 613%, due in part to a one time tax benefit. Cadence was number 2 in percentage gain and number 1 in absolute net income dollars, earning more in Q4 2007 than the other 5 vendors combined.


Company by Company Q4 2007 details:
On February 26, 2008 Altium Limited reported financial results for its fiscal half-year 2007/2008, the period ended December 31, 2007. Total revenue for the calendar fourth quarter alone was $AU14.3 million, a modest increase of 3.3% year-over-year and 21% from the just prior quarter. For the half year, there was a net loss of $AU2 million after tax. Altium reports geographic information in dollars or euros. The table below converts euros to US dollars.



There was year-over-year revenue growth in all geographies in the half-year, with China growing at 129%.

Nick Martin, Altium CEO, said, “These results reflect the planned investments made during the period in product development, recruitment, and organizational systems and meet the expectations set by Altium at the end of December, with EBITDA better than expected. With two major product releases in this second half-year - the launch of the Altium Innovation Station in February, and a new Altium Designer product release scheduled in May - we are confident that we are on track to deliver the planned growth in sales, revenue and profit for the full financial year compared with the previous financial year.“

“The investment made during the half-year in identifying and recruiting senior regional business management also gives us confidence in the full year,” said Emma Lo Russo, President and COO. “In the Americas, Altium ended the half-year period by appointing Gerry Gaffney as Senior Vice President & General Manager Americas, to provide the senior regional and strategic sales management and expertise that the company lacked in that region for the first half year period.”



On February 14, 2008 Ansoft Corporation announced financial results for its third quarter of fiscal 2008, the period ended January 31, 2008. Total revenue for the quarter was $26.1 million, up 15% from the $22.7 million in the third quarter of 2007, and up 12% from the $23.4 million in the prior quarter. License revenue was $15 million, representing 57% of total revenue. This was a 14% increase year-over-year and a 21% increase sequentially. Revenue from services and other sources was $11.1 million, or 43% of total revenue. This was an increase of 16% year-over-year and almost 2% sequentially.

International revenue accounted for 57% and 61% of the Company's total revenue in the three-month periods ended January 31, 2008 and 2007, respectively. Revenue in Asia accounted for 40% and 41%, and revenue in Europe accounted for 17% and 20% in the three-month periods ended January 31, 2008 and 2007, respectively.

The Electromechanical area accounted for 16% of total revenue, down a tad from 18% a year earlier, while the High Frequency area was 84% of total revenue, up from 82%.

Ansoft's three largest customers during the most recent quarter were Samsung, Freescale Semiconductor and Intel.

On November 30, 2007 Ansoft announced that Thomas A.N. Miller, the company's Chief Financial Officer, would retire on December 31, 2007. Miller, who was one of the company's founders and had served as Chief Financial Officer since February 2004, was succeeded by Shane Emswiler, Ansoft's Vice President of Finance. Emswiler joined the company in September 2004.

Net Ansoft income for the recent quarter was $6.5 million, an increase of 3.1% from the $6.3 million in the year ago quarter, and a 24% increase from the $5.2 million in the just previous quarter. Operating income for the last quarter was $10.0 million, representing a 36% increase when compared to operating income of $7.4 million in the previous year's comparable quarter. Net income for the prior year's comparable quarter included a tax benefit of $1.1 million.

Nicholas Csendes, Ansoft's President and CEO, said, "We are pleased to report strong revenue growth in both domestic and international markets. For the fourth [upcoming] quarter, we expect continued revenue growth of around 10-15%."


On January 30, 2008 Cadence Design Systems, Inc. reported on financial results of the fourth quarter and the 2007 year, the periods ended December 31, 2007. Total revenue for the fourth quarter was $458 million, an increase of 6.2% from the $431 million in the fourth quarter of 2006, and an increase of 14.2% from the $401 million in the third quarter of 2007. Product revenue was $328 million, or 72% of total revenue. This was a year-over-year increase of 10.3% and a 20% increase sequentially. Maintenance revenue was $100 million, accounting for 22% of total revenue. This was an increase of 1.5% year-over-year and a sequential increase of nearly 4%. Services revenue of $30 million accounted for the remaining 6% of total revenue.

Revenue from North America accounted for 50% of total revenue, revenue from Europe 17%, revenue from Japan 22% and revenue from Asia 11%. North American revenue was down 15.4% year-over-year, but up nearly 27% sequentially. European revenue was down 9% year-over-year, and down 30% sequentially. Japanese revenue was up 123% year-over-year and nearly 4% sequentially. Asian revenue was up 1.5% year-over-year but down 4.8% sequentially.

In terms of functional areas, Functional Verification accounted for 26% of total revenue, Digital IC Design fro 27%, Custom IC for 25%, DFM for 6%, System Integration for 9% and Services for 7%.

Net income for the fourth quarter was $119 million up 147% from the $48 million in he fourth quarter of 2006, and up 66% from the $73 million in the previous quarter.

Mike Fister, president and CEO of Cadence, said, "Our strategy is on track, our technology has never been stronger, and we continue to focus on delivering solutions to help our customers manage their businesses in a challenging environment.”

Bill Porter, executive vice president and chief financial officer, added, "We achieved our long standing goal for operating margin for the year, and will keep our focus on improving our operating efficiency through 2008.


On January 31, 2008 Magma Design Automation Inc announced financial results for the third quarter of its fiscal 2008 year, the period ending January 6, 2008. Total revenue for the quarter was $55.7 million, an increase of 23.6% from the $45 million in the same quarter a year ago and increase of 4.2% from the just prior quarter. License revenue was $35.6 million, accounting for 64% of total revenue. This was an increase of 49% year-over-year and essentially flat sequentially. Service revenue was $8.8 million, or 16% of total revenue, a decrease of 20% year-over-year but an increase of 2.4% sequentially. Revenue from bundled license and services was $11.2 million, accounting for 20% of total revenue. This was an increase of 12.5% year-over-year and 22.4% increase sequentially.

In the quarter, 82% of revenue came from backlog-related transactions and 18% from orders completed in the quarter, an improvement over the 76% of revenue in the prior quarter.

In the quarter North America accounted for 66% of total revenue, Europe 12%, Japan 12.5% and Asia Pacific 10%.



Net loss for the quarter was $5.9 million, compared to a net loss of $13.5 million in the year ago quarter and compared to a net loss of $6.4 million in the just previous quarter.

Rajeev Madhavan, chairman and CEO of Magma, said, “In Q3 we delivered another quarter of record revenue, and we continued to see improved profitability and strong cash flow. Our research and development teams continue to deliver capabilities for products serving both our traditional and new markets, maintaining a strong technology edge over our competitors.”


On February 28, 2008 Mentor Graphics reported financial results for the first quarter of its fiscal 2009, the period ended January 31, 2008. The results were records in revenue and earnings. Total revenue for the quarter was $285 million, an increase of 14% from the $250 million in the same quarter a year ago and a 53% increase from the unusually low $186 million in the just prior quarter. System and software revenue was $201 million, accounting for 71% of total revenue. This was an increase of 17% year-over-year, and a 93% increase sequentially. Service and support revenues for the quarter were $84 million, or 29% of total revenue. This was an increase of over 7% year-over-year, and an almost 2% increase sequentially.
In the quarter, revenue from America accounted for 40% of total revenue, from Europe 30%, from Japan 15% and from the Pacific Rim 5%.



Revenue by product line was 30% Design2Silicon, 30% Scalable Verification, 20% Integrated Systems and 15% New and Emerging. The top ten customers accounted for 50% of total revenue.


Net Income for the quarter was $35.7 million, an increase of 15% from the $30.1 million in the year ago quarter and a significant turnaround from the net loss of $9.1 million in the prior quarter.

Gregory K. Hinckley, president of Mentor Graphics, said, “The company executed well in fiscal 2008, and we are positioned to continue to outperform the market in fiscal 2009. Additionally, we have tightened our focus on cost controls, and have taken a number of actions, including shuttering our IP division, to provide a more competitive cost basis going forward.”


On February 20, 2008 Synopsys, Inc. reported financial results for the first quarter of Fiscal 2008, the period ended January 31, 2008. Total revenue for the quarter was $315 million, an increase of 5% from the $300 million in the same quarter a year earlier and flat with respect to the prior quarter. Time-based license revenue at $268 million accounted for 85% of total revenue. This was an increase of 6.5% year-over-year and an increase of 3.8% sequentially. Maintenance and service revenue was $35 million, accounting for 11% of total revenue. This was flat year-over-year, and down almost 5% sequentially. Upfront license revenue at $12.5 million accounted for 4% of total revenue. This was down 7.3% year-over-year, and down almost 39% sequentially. North American revenue accounted for 52% of total revenue, European revenue 16%, Japanese revenue 17% and Pac Rim revenue 5%. North American revenue was up 6.6% year-over-year, but down 1.2% with respect to prior quarter. European revenue was up about 2.5% year-over-year and sequentially. Revenue from Japan was up almost 4% year-over-year and almost 8% sequentially. AP revenue was up 4.5% year-over-year, but down 5.5% sequentially.





On February 5, 2008 Synplicity Inc. reported financial results for the fourth quarter and the year, the periods ended December 31, 2007. Total revenue for the quarter was $20 million, an increase of 22% from the $16.4 million in the fourth quarter of 2006 and an increase of 3.3% from the $19.4 million in the third quarter of 2007. License revenue was $9 million, or 45% of total revenue. This was an increase of 68% year-over-year and an increase of over 16% sequentially. Maintenance revenue was $7.4 million an increase of nearly 8% year-over-year and an increase of 4.7% sequentially. Bundled service revenue was $3.7 million or 18% of total revenue. This was a decrease of 12% year-over-year and a decrease of 20% sequentially.

Net income for the quarter was $10.3 million, an increase of 549% from the $1.6 million in the year ago quarter and a 613% increase from the $1.45 million in the prior quarter. This quarter's GAAP net income included a benefit of $9.4 million related to the recognition of deferred tax assets in accordance with the accounting rules specified in SFAS 109.

Gary Meyers, Synplicity president and chief executive officer, said, “I am pleased to report outstanding bookings and revenue growth in each of our three product categories in the fourth quarter of 2007 compared to a year ago. Our ASIC verification solution, Confirma, which integrates our software with the HAPS hardware acquired through our acquisition of Hardi in June 2007, presents us with the largest market opportunity in our history. In addition, our FPGA synthesis line continues to gain share and revenue from our ESL products is growing at nearly a 50% rate, with a more than doubling of bookings in 2007. We are in the process of introducing enhancements across our product line, providing us with the prospects for another solid year in 2008.”


EDA Vendor Stock Performance

The covered EDA vendors did not do so well in this category. As shown in Tables 8 and 9 and Figure 3 below, the combined stock prices for the EDA vendors declined almost 8% in absolute dollars compared to the same period last year. This was an average fall in price of 8.2%. On a year-over-year basis only LogicVision had an increase in stock price, at almost 37%. Mentor and Altium suffered the largest percentage decline at minus 40% and minus 31%, respectively. On a sequential basis the combined stock prices fell almost 17% in absolute terms and on average fell 15%. All the firms had stock price decreases compared to the prior quarter. Mentor, Cadence and Ansoft endured declines over 20%. Synopsys tolerated the smallest decline.



The popular stock indexes rose an average of 6.6% compared to the fourth quarter of 2006, but fell 3.4% with respect to the last quarter.



The value of EDA Vendors' equity may well suffer again in 2008. As readers know, the EDA software industry is dependent heavily on robust manufacturing activity. On March 01, 2008, The Chicago Tribune reported that the Chicago purchasing managers index, a closely followed measure of manufacturing activity, dropped in February to its lowest reading since the recession year of 2001. Instead of dropping from January's lackluster reading of 51.5 to 49.5 in February, as economists had predicted, the index unexpectedly plunged seven full points, to 44.5, its lowest level since December 2001. Economist Ryan Sweet of Moody's Economy.com noted that "a below-50 level in orders and uncertainty about the economic outlook have led manufacturers to hit the brakes." He added that this "report underscores the fact that with consumers turning wary and the impact from the collapse of the housing sector still spreading, the manufacturing sector is clearly struggling."

As we sink deeper into W's second recession, here is another economic tidbit. Capping a unremitting rise in the last seven years, oil prices hit a record high during the day on March 3, 2008, according to a report March 4, 2008 in the New York Times. March 3rd's highest trading price, $103.95 a barrel on the New York Mercantile Exchange, broke the record set in April 1980 during the so-called second oil shock. That price, $39.50 a barrel, equals $103.76 today, when adjusted for inflation. Oil prices hit even higher records later in the first week of March 2008, and traded above $108 a barrel on March 10, 2008. The trend is expected to continue, especially after FED Chairman Ben Bernanke signaled in late February 2008 that he was ready to cut interest rates still further to try to bolster sagging US economic growth, despite relentlessly rising consumer prices.

Sales of cars and trucks in the United States fell 10% in February 2008. Americans were paying an average of $3.165 for a gallon of regular gas as of March 3, 2008, 69.8 cents more than a year ago, according to the AAA. In CA it's more like $3.60 now. Analysts say that a US average for regular of $4 a gallon is possible within months. By the way, lest we forget, oil was about $20 a barrel when W took office in 2001.

More bad news was released by the US Labor Department on Friday March 7, 2008. Employers slashed jobs by 63,000 in February 2008, the most in five years. The Labor Department's report also showed that hundreds of thousands of people - discouraged by their job prospects - left the civilian labor force. Job losses were widespread, with hefty cuts coming from construction, manufacturing, retailing, financial services and a variety of professional and business services. February manufacturing payrolls alone fell by 52,000, the most in five years. Those losses swamped job gains elsewhere in non-value added sectors like leisure and hospitality and the government. The same Labor Report also showed that the job losses suffered in December 2007 and January 2008 were far worse than the government first reported: payrolls for December and January were revised down by 46,000.

January & February were the first monthly back-to-back job losses since May and June 2003, when the US job market was still struggling to recover from the blows of W's first recession in 2001. The March 7, 2008 jobs report was much weaker than economists were expecting. They were forecasting employers to boost payrolls by around 25,000. February 2008 was also the third straight monthly drop for private-sector jobs, falling 101,000 in February alone.

The dismal US jobs report released March 7, 2008 also showed that total overall employment is actually lower than it was three months ago. Every time such a slump has occurred since the early 1970s, a recession has followed - or already been under way. Also, private-sector payroll employment has now declined by an average of 47,000 a month - a decline that has been followed by a recession every time it has happened in the last 50 years.

And if the most recent so-called 'good times' have really ended, they were never that good to begin with! Most American households are still not earning as much annually as they did in 1999, once inflation is taken into account! The median US household earned $48,201 in 2006, down from $49,244 in 1999, according to the US Census Bureau.

Over the last year, the number of officially unemployed in the US has risen by 500,000, while the number of people outside the labor force - neither working nor looking for a job - has risen by 1.3 million! Employment has risen by 100,000 over the last year, but even that comes with a caveat: there are also 600,000 more people who are working part time because they could not find full-time work, according to the US Labor Department.

But, hey, those rebate checks are a-coming! The Treasury Department will begin sending out rebate checks - of up to $1,200 for couples, plus $300 per child - in May 2008, as part of the much-heralded 'stimulus package.' In fact, the IRS is spending $42 million of your taxes merely to send us all letters to tell us the checks are coming, for crying out loud. These rebates will fix everything, right?

The Fed has already cut its benchmark short-term interest rate five times since September 2007, and more cuts are planned in mid-March 2008. These cuts will probably not work any better that the previous ones. The Fed's problem is that its main weapons against a downturn - lower interest rates and easier money - are ill-suited to a crisis that stems from collapsing confidence about credit quality. And meanwhile, good luck if you are trying to live off your personal savings - your interest rates are far lower now and inflation is rampant - a deadly one-two punch.

And another miscalculation: home prices are now falling in almost every part of the country, a phenomenon that Fed officials until recently thought was all but impossible, and some analysts now predict that average home prices across the US will ultimately fall 20% from their peak in early 2006.

Closing quote from Nobel Prize-winning economist Joseph Stiglitz at a congressional hearing on February 28, 2008: “Because the Bush administration actually cut taxes as we went into the current Iraq war, when we were already running huge deficits, this war has, effectively, been entirely financed by deficits. The national debt has increased by some $2.5 trillion since the beginning of the Iraq war, and of this, almost $1 trillion is due directly to the Iraq war itself ... By 2017, we estimate that the national debt will have increased, just because of the war, by some $2 trillion.”


EDA Results - Full Calendar Year 2007

Some of the firms have fiscal years other than the calendar year. In these cases the last four reported quarters of operation will be used. All the vendors delivered year-over-year revenue growth. The G7 as a group grew revenue by 14%. See Table 10.


Also. all the EDA firms exhibited net earnings growth in 2007, except Magma. The group as a whole more than doubled its net income vs. 2006.

For calendar 2007 Ansoft had total revenue of $98 million, up nearly 15% from the $85 million in calendar 2006. Net income for the year was $23.5 million, up 14.4% from the $20.6 million in the prior year.

For the calendar year Cadence generated total revenue of $1.6 billion, up 8.8% from the $1.48 billion in 2006. Product revenue of $1.1 billion was up 12.3%. Maintenance revenue of $385 million was up 5.2%, and Services revenue of $126 million was down 6.7%. Net income for the year was $296 million, an increase of 107% from the $142 million in 2006.

In the calendar year Magma had total revenue of $209 million, a nearly 31% increase from the $160 million in the prior year. Net loss for the year was $48 million, an increase in loss of 12% from the net loss of nearly $43 million in the prior year.

In the 2007 year Mentor Graphics reported total revenue of $880 million, an increase of 13.5% from the previous year. Net Income for the year was a meager $28.8 million, up half a percent from 2006. Calendar 2007 revenue from America accounted for 45% of total revenue, from Europe 25%, from Japan 15% and from Pacific Rim 15%. These same percentages were recorded in 2006.

For the calendar year Synopsys had total revenue of $1.228 billion, an 8.1% increase from the $1.136 billion in the prior year. Net income for the year was $153 million, a 231% increase from the $46 million in 2006.

For the calendar year Synplicity had total revenue of $71 million, an increase of 13.8% from the $62.5 million in 2006. License revenue was $26 million, up 46%. Maintenance revenue was $28 million, up nearly 3%. Bundled services revenue was $17 million, down 2.6%. Net income for the year was $13 million versus $3.2 million in 2006. The fourth quarter of 2007 included a tax related benefit of $9.4 million.


MCAD versus EDA -- Q4 2007

The detailed quarterly performances for Q4 2007 of a selected group of public MCAD Vendors has been provided in the authors' MCAD Commentary March 2008 recently published on MCADCafe.

The revenue from the top three MCAD vendors was $1.37 billion, 29% higher than the revenue from the big three EDA vendors. But top three MCAD earnings were only slightly ahead of big three EDA earnings. See Table 12.


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.


For the year the MCAD top three had 37% more revenue than the big 3 EDA firms and 54% more in earnings. See Table 13.


Forecast Guidance from Individual EDA Providers

Altium Limited did not provide guidance.

As guidance Ansoft expects revenue in the next quarter to be around $32.5 million, compared with $26.1 million in the quarter just reported, and $22.7 million in the same quarter a year ago.

As guidance for the next quarter Cadence expects total revenue in the range of $280 million to $290 million, compared to $459 million in the quarter just reported. For the full year 2008, Cadence expects total revenue in the range of $1.490 billion to $1.540 billion.

As guidance Magma expects total revenue in the range of $56 million to $58 million, compared to $55.7 million in the quarter just reported, and compared to $50.2 million in the corresponding quarter last year.. Revenue for fiscal 2008 is now expected to be in the range of $215 million to $217 million, representing growth in the range of 21% to 22% over fiscal 2007. This is an increase from previous guidance that revenue would grow in the range of 17% to 20%. Magma expects fiscal 2009 revenue will increase in the range of 12% to 15% over our expected full-year revenue for fiscal 2008.

Magma also announced that it will change its fiscal year, essentially shifting the fiscal calendar one month later. This change will have no impact on the current fiscal year which will end April 6, 2008. Fiscal 2009 will begin May 5th, 2008 and end on May 3rd, 2009. As a result of this change, there will be a four-week transition period between fiscal 2008 and fiscal 2009 beginning April 7th, 2008 and concluding May 4th, 2008.

For the first quarter, Mentor Graphics expects revenue to be about $170 million. This compares with $284 million in the quarter just reported and compares to $190 million in the first quarter of 2007. For fiscal year 2009, the company expects revenue growth of about 4% to about $915 million compared to $880 million in fiscal 2008.

As guidance Synopsys expects revenue in the next quarter to be in the range of $317 million to $325 million, compared to $315 million in the quarter just reported and compared to $293 million in the same quarter last year.

As guidance Synplicity expects revenue in the next quarter to be in the range of $17.5 million to $18.5 million, compared to $20 million in the quarter just reported and compared to $16.4 million in the same period a year ago. For the year ending December 31, 2008 Synplicity expects revenue to be in the range of $80.0 million to $83.0 million, versus $71.2 million in 2007.


EDA Consortium's Market Statistics

On January 14, 2008 the EDA Consortium's Market Statistics Service (MSS) announced that the EDA industry revenue for Q3 of 2007 grew 7.2% to $1,412 million, versus $1,317 million in Q3 2006. The four-quarter average growth rate, which compares the most recent four quarters to the same four quarters in the prior year, was 12.3%.

In the third quarter of 2007 the CAE segment accounted for 40% of total revenue, IC Physical Design and Verification for 26%, PCB/MCM for 9%, Semiconductor IP for 19% and Services for 6.0%.


For the third quarter North America accounted for 44% of total revenue, Western Europe for 20%, Japan 21% and ROW 14%.



Aart de Geus, chairman of the EDA Consortium and chairman and CEO of Synopsys, Inc., said, “The industry shows solid growth again this quarter, especially in Computer Aided Engineering. Although positively impacted by broader participation in terms of reporting companies, the four-quarter moving average reveals double-digit growth in the top product segments.”


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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 forty. 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 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 March 2008 EDA Industry 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 EDAcafe Weekly.

Since May 2003 the authors have now published a total of sixty-three (63) 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, 2008 marks the 12th Anniversary of the founding of HENKE ASSOCIATES.

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