Electronics IP Industry – A February 2010 Update
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Electronics IP Industry – A February 2010 Update


Commentary:

Electronics IP Industry – A February 2010 Update


by Dr. Russ Henke
Henke Associates

IMPORTANT NOTICE


Attention Loyal Readers of the Electronics IP Industry & the EDA Industry Commentaries presented here quarterly since 2003:

Don’t worry – they aren’t going away! They will each continue to appear quarterly, but the latest EDA and IP information will be combined into one quarterly document that will be published as part of the EDA WEEKLY collection. The first edition in this new format will appear in late December 2010 or early January 2011, cleverly entitled, "EDA & IP Industry Commentary for Q3 2010." Subsequent EDA and IP information will likewise appear each subsequent quarter in this fashion.

Content-continuity with previously-posted IP and EDA data will be fully preserved, as follows:


In the previous twenty-six (26) quarterly issues of the Electronics IP Industry Commentaries, Henke Associates examined the recent financial histories and future outlooks of the remarkable phenomenon of Electronics Intellectual Property (IP) providers, a niche that had emerged in its own right to claim a substantial amount of revenue in the world of Electronics Design Automation.

Henke Associates had arbitrarily selected eight (8) publicly-traded companies originally (called the "Group-of-8" or "G8"), as representative of the then-current financial state of the Electronics IP industry. At the end of 2004, ARM completed its acquisition of Artisan Components, Inc., thereby reducing the "G8" to "G7". In August 2009 Mentor Graphics completed its acquisition of LogicVision, thereby reducing the “G7” to “G6”. Accordingly, in this February 2010 Commentary, the financial performances of the "G6" Electronics IP vendors for the fourth quarter of 2009 will be considered.

Current Group-of-6 ("G6"):



For the “G6” companies above, it is assumed that all of their revenues are Electronics IP sales and/or directly related IP services.

News Highlights:


Positive Economic News - Finally: Some welcome news appeared on January 29, 2010, when the US Government released an estimate of GDP in Q4 2009, a robust figure of 5.7%, the fastest pace in more than six years. Q4's GDP increase followed a 2.2% increase in Q3 2009. Also, on February 5, 2010 the US Labor Department said that the nation's unemployment rate dropped in January 2010 to 9.7%.

More specific to the Electronics IP Industry, on February 1, 2010 the Semiconductor Industry Association (SIA) reported that worldwide semiconductor sales in 2009 were $226.3 billion, a decline of 9% from 2008 when sales were $248.6 billion. Total sales for 2009 surpassed the SIA forecast of $219.7 billion. December sales were $22.4 billion, an increase of 29% from December 2008, when sales were $17.4 billion. December sales declined by 1.2% from November when sales were $22.7 billion. (All monthly sales numbers represent a three-month moving average).

“2009 turned out to be a better year for the global semiconductor industry than expected,” said SIA President George Scalise.A strong focus on inventories throughout the supply chain mitigated the impact of the worldwide economic downturn and positioned the industry for growth as the global economy recovers. Sales in the final quarter of 2009 were supported by healthy demand in a variety of end markets including PCs, cell phones, and consumer electronics. In 2010, unit sales of personal computers and cell phones - which account for approximately 60% of total semiconductor consumption - will grow in the low-to-mid teens, providing a solid platform for chip sales. Consumer electronics are expected to grow in the mid-single digits,” Scalise continued. “We are also seeing the effects of recovery in the enterprise sector and we believe this trend will continue,” Scalise noted. The SIA expects a return to normal seasonal patterns, which suggests a modest slowdown in the first quarter.

China and India, two key emerging markets, are also driving demand. In addition to purchasing consumer items such as handsets and computers, both regions are continuing to invest in wired and wireless infrastructure. These investments in infrastructure create demand for a broad range of semiconductor products.

“Advances in technology are continually enabling development of new products, such as netbook and tablet computers,” said Scalise. “Attractive price points for these products are creating new market segments that hadn't previously existed, and they are adding to overall semiconductor demand.”

“With improving consumer confidence and signs of economic recovery around the world, the semiconductor industry is well positioned for growth in 2010,”
Scalise concluded.

About the SIA Global Sales Report: The SIA Global Sales Report (GSR) is a three-month moving average of sales activity. The GSR is tabulated by the World Semiconductor Trade Statistics (WSTS) organization, an independent, non-profit organization established by the global semiconductor industry to compile industry statistics. The moving average is a mathematical smoothing technique that mitigates variations due to differences in companies' financial calendars. About the SIA The SIA is the leading voice for the semiconductor industry and has represented U.S. semiconductor companies since 1977. Collectively, the chip industry employs a domestic workforce of approximately 200,000 people. The semiconductor industry is America's second-largest exporting industry. More information about the SIA can be found at www.sia-online.org .

On January 28, 2010 Gabe Moretti reported on his web site “Gabe on EDA” that Jay Vleeschhouwer had recently joined Ticonderoga Securities as Senior Software Analyst and has started covering the EDA Industry for that firm. One of Jays' comments in his first report for 2010 was, “We expect that this [EDA] industry, which serves the semiconductor and electronics markets, declined by about 10% in 2009 to $4.15 billion, after having declined 11% in 2008; we expect 3%-4% growth in 2010.” Gabe provided other details form Jay's report, details which may be recounted in the next quarterly EDA Industry Commentary due out in March 2010. (By the way, on January 19, 2010 Gabe Moretti began alternating with the author of this Electronics IP Commentary in posting EDA Weekly articles every two weeks in EDAcafe.com. This author’s first EDA Weekly article appeared on November 09, 2009, entitled. The Role of Business Planning.).

Another interesting article commenting on the overall EDA Industry prospects for 2010 appeared in EE Times on February 01, 2010 by Anne-Francoise Pyle. The article presents a discussion with EDA “pundits” Dr. Walden Rhines, EDAC chair and chairman and CEO of Mentor Graphics Corp.; Gary Smith, principal of Gary Smith EDA; and Joseph Borel, former executive vice president in central research and development at STMicroelectronics NV and now of the JB-R&D consulting company. It's fair to say that predictions of EDA prosperity in 2010 were not uniform among these three pundits.

You may access this article at the following URL:

http://www.eetimes.com/showArticle.jhtml?articleID=222600575

In an article related to semiconductor chips' impact on EDA growth, Peter Clarke published the following post in EE Times on February 01, 2010, “Graphics chips shipments to rise 27% in 2010, says analyst.”

URL: http://www.eetimes.com/showArticle.jhtml?articleID=222600563


Excepts follow: Some 544 million graphics chips will ship in 2010, up 27.9% on the 425.4 million shipped in 2009, according to market analyst Jon Peddie Research (Tiburon, CA). In 2011 the market will return to more conservative annual growth rate with 10% growth taking the market to 600 million units, the market research firm predicted. The 425.4 million graphics chips shipped in 2009 was up 14% on the 373.0 million shipped in 2008 and Peddie described this as "an amazing comeback, in this year of retrenching and recession.” The market was helped by a very strong fourth quarter in which both Intel Corp. and Advanced Micro Devices Inc. more or less doubled sales on the same quarter a year before. “Intel was the leader in 4Q09, elevated by sales of the Atom microprocessor for netbooks, as well as strong growth in the desktop segment. AMD gained in the notebook integrated segment, but lost some market share in discrete graphics chips in both the desktop and notebook segments due to constraints in supply of 40-nm chips,” Peddie said. “Meanwhile Nvidia picked up a little share overall. Nvidia's increases came primarily in desktop discretes, while slipping in desktop and notebook integrated. In terms of market share in 4Q09: Intel had 55.2%, Nvidia 24.3% and AMD had 19.9%,” according to Peddie.

On February 3, 2010 ARM and a specialist for security technology Giesecke & Devrient (G&D) announced a strategic partnership for the development of secure mobile phone platforms. Through the combination of ARM® TrustZone® technology, which creates a protected area in advanced systems-on-chip, and the secure Mobicore operating system developed by G&D, sensitive applications such as electronic payment and online banking via mobile phone may soon be protected from security threats. As a first step the two companies will develop a joint prototype.We will be working with ARM to develop the security architecture for the next generation of mobile phones. This will enable people to access valuable services with convenience and security,” said Dr. Kai Grassie, head of the New Business division at G&D. “ARM TrustZone technology is already an integral part of the ARM Cortex™-A series processors which are currently being deployed in smartphones by many of the industry's leading handset manufacturers,” said Ian Drew, executive vice president, Marketing, ARM. “This collaboration with G&D will enable us to make rapid progress towards enabling secure transactions in next-generation mobile devices.”

On January 26, 2010 Mindspeed Technologies, Inc. and CEVA, Inc announced that CEVA's X1641 DSP for wireless infrastructure applications is deployed in Mindspeed's new Transcede 4000 wireless baseband packet processor. The Transcede 4000 is said to enable a new class of high-performance, low-power, software-programmable devices that solve the computational challenges presented by next-generation mobile networks. The Transcede 4000 device is the first in a planned family of System-on-Chip (SoC) solutions that will use the CEVA DSP core. The 4000 application-specific baseband processor SoC is spec'd to combine 48 giga multiplications and accumulations per second (GMACs) of DSP performance with 9000 Dhrystone million instructions per second (DMIPS) of reduced instruction set computer (RISC) processing performance. This processing performance is designed to allow the physical and medium access control layers to be co-located on a single SoC.

On January 25, 2010 MIPS Technologies, Inc. announced that the MIPS Board had appointed Sandeep Vij as president, CEO and director. (Vij succeeded Interim CEO Anthony B. Holbrook. As announced in July 2009, John Bourgoin retired effective December 31, 2009. Bourgoin had led MIPS since 1998). Vij has more than 20 years of senior-level management experience in the semiconductor industry. Prior to joining MIPS, he was VP & GM of the Broadband and Consumer Division of Cavium Networks. Prior, Vij was on the executive staff of Xilinx Inc. for 12 years, and before that he spent five years in various senior roles at Altera Corporation. Vij is a graduate of General Electric's Edison Engineering Program and Advanced Courses in Engineering. He is also on the Board of Coherent Inc. Vij has an MSEE from Stanford University and a BSEE from San Jose State University.

See the URL below for more detailed information:

http://www.mips.com/news-events/newsroom/index.cfm?i=43422&y=2010


On February 02, 2010 MoSys, Inc. unveiled a roadmap for its new Bandwidth Engine(TM) integrated circuit (IC), which will combine MoSys' patented 1T-SRAM(R) high-density embedded memory with its ultra high-speed 10 Gigabits per second (Gbps) SerDes interface (I/O) technology and an arithmetic logic unit (ALU). MoSys' Bandwidth Engine is said to promise unparalleled bandwidth performance in next-generation networking systems for storing, manipulating and accessing packets, control information and statistics at breakthrough rates. MoSys also announced the expansion of its overall business model to become a fabless semiconductor company supplying high-performance ICs, in addition to differentiated IP.

MoSys expects its Bandwidth Engine to enable up to four times the throughput, two to four times the density, up to 40% lower power and system cost savings of up to 50% compared with today's alternative solutions. MoSys expects to offer samples of the first Bandwidth Engine ICs in late 2010, with production quantities available in the second quarter of 2011.

On January 19, 2010 Samsung Electronics and Rambus announced that they had reached agreement settling all claims between them and licensing Rambus' patent portfolio covering all Samsung semiconductor products including a perpetual fully paid-up license to certain current DRAM products. As part of the overall agreement, Samsung will invest $200 million in Rambus stock. Other consideration to Rambus includes an initial payment to Rambus of $200 million and a quarterly payment to Ranbus of about $25 million for the next five years. In addition, Samsung and Rambus have signed a memorandum of understanding relating to a new generation of memory technologies which brings together Samsung's capabilities in memory technologies with Rambus' efforts in high performance memory interfaces. The two companies will initially focus on graphics and mobile memory solutions and will further review a potential collaboration on server and high-speed NAND Flash memories. Samsung and Rambus both said that they are pleased to resolve their differences and move forward.

On January 11, 2010 Virage Logic Corporation (NASDAQ:VIRL) announced it had established a Dutch corporation (B.V.) in conjunction with its new research and development (R&D) center of excellence in Eindhoven, The Netherlands. The new site is a result of Virage Logic's recent acquisition of NXP's horizontal advanced CMOS intellectual property (IP) rights. Virage Logic's Netherlands' R&D center will develop new products based on the acquired advanced CMOS I/Os, analog mixed signal and System-on-Chip (SoC) infrastructure IP, and will also provide on-going support to NXP. The company also announced that it had named Joshua Rom as the managing director of Virage Logic's Netherlands B.V. entity and general manager of its newly formed Analog Business Unit. Prior to joining Virage Logic in November 2009, Rom was a consultant to several companies on a variety of topics from yield improvement to mergers and acquisitions. A semiconductor industry veteran with more than 30 years of experience, Rom was the first vice president of operations at Ikanos Communications where he was instrumental in taking this venture from a start-up to a $150 million company over a three-year period. Rom also served as a director of engineering at Broadcom Corp. Rom holds an MBA from San Jose State University, California and a B.Sc.EE from Tel-Aviv University in Tel-Aviv, Israel.

How did the Electronics IP G6 perform in the Fourth Quarter of 2009?


Table 1 below reveals that the combined G6 total revenues grew to $221.29 million in calendar Q4 2009, up 15.3% from the sequential total of $192.05 million in Q3 2009, but the G6 combined revenue was basically flat relative to Q4 2008. Virage Logic easily led the Q4 quarterly growth percentage parade sequentially and year-over-year, as Virage Logic slipped past MIPS to claim third place in the Q4 2009 revenue list behind ARM and RAMBUS. Each G6 vendor improved its quarterly revenue number sequentially, but only CEVA and Virage Logic beat its respective year-over-year performance, with Virage Logic turning in a spectacular year over year revenue increase.



Relative to earnings, Table 2 below reveals that combined, the G6 IP providers at last squeaked into black ink in calendar Q4 2009, but barely, with a combined total profit of only $4.26 million. But hey, this Q4 profit represents a major improvement of some $26.4 million from the deep red of the just prior Q3 2009 quarter.

Each covered vendor improved its profitability in Q4 2009 over Q3 2009, but it was ARM's improvement in Q4 2009 measured in US dollars that carried the total of the G6 into the black in Q4 2009. Once again, three of the G6 remained in the red, with Rambus once more accounting for the bulk of the losses.

Year over year, Q4 2009 barely exceeded the collective G6 profit of Q4 2008. In Q4 2009, only three vendors were in the back, whereas 5 of the 6 delivered black ink in Q4 2008.




Q4 2009 Results of Individual Electronics IP Providers:

 


On February 02, 2010 in CAMBRIDGE, UK, ARM Holdings plc announced its unaudited financial results for the fourth quarter and full year ended December 31, 2009. ARM said the results reflected “resilient trading performance and further progress in delivering ARM's strategy.” Total revenue for the quarter was $140 million, compared to $149.4 million in Q4 2008, and compared to $123 million in Q3 2009.

Profit for Q4 2009 was $28.44 million, compared to $27.22 million in Q4 2008, even though the profit measured in pounds was about the same in both quarters. The difference in dollars is caused by a more favorable currency exchange rate now vs. last year. Profit on Q3 2009 was $11.27 million.

For the full year 2009, ARM revenues were $489.5 million, down over 10% from 2008 revenues of $546.2 million. However, 2009 revenue measured in pounds was actually up some 2% over 2008, but the effective foreign exchange rate for 2009 was only 1.60 vs. 1.83 in 2008. Profit for the year measured in dollars was $64.70 million in 2009 vs. $79.77 million in 2008. The same numbers measured in pounds were 40.44 million and 43.59 million, respectively.

ARM's Statement of Progress against its strategy in Q4 2009: Warren East, Chief Executive Officer, said, “We are pleased that in Q4 ARM has continued to outperform the semiconductor industry as we gain market share. Throughout 2009 we demonstrated the resilience of the ARM business model in a challenging trading environment. Despite industry dollar revenues being down about 20% in the relevant period, ARM market share gains resulted in dollar revenues being down 10% with on-going financial discipline maintaining normalized operating margins over 30% and delivering strong cash generation.

The company is well-placed for this strong performance to continue as leading semiconductor manufacturers are increasingly designing ARM technology into their products, and as ARM technology becomes ever more pervasive in markets with long-term structural growth such as smartphones, digital TVs and microcontrollers. Recently, Infineon and STMicroelectronics have announced the intention to use, for the first time, ARM processors in their smartcard and digital TV/set-top-box product lines respectively,” East concluded.



On January 28, 2010 CEVA, Inc. (NASDAQ: CEVA) announced its financial results for both the fourth quarter and the year ended December 31, 2009. Total revenue for the fourth quarter of 2009 was $10.18 million, a modest sequential increase of 5.3% over $9.66 million in Q3 2009, but an increase of only 1.8% compared to $10 million reported for the fourth quarter of 2008. The $10.18 million in Q4 revenue was just a bit above the middle of the revenue range given as guidance three months ago.

Fourth quarter 2009 licensing revenue was $4.7 million, an increase of 2% when compared to $4.6 million reported for the fourth quarter of 2008. Royalty revenue for the fourth quarter of 2009 was a record $4.8 million, a major increase of 13% compared to $4.3 million reported for the fourth quarter of 2008. Revenue from services for the fourth quarter of 2009 was $0.7 million, down 41% from $1.1 million reported for the fourth quarter of 2008.

GAAP net income for the fourth quarter of 2009 was $2.91 million, a healthy sequential increase of 66% over $1.75 million in Q3 2009, and a whopping increase of 203% over $0.96 million reported for the same period in 2008.

GAAP diluted earnings per share for the fourth quarter of 2009 was $0.14, an increase of 180% compared to $0.05 for the fourth quarter of 2008.

During the fourth quarter of 2009, the CEVA concluded nine new license agreements. Six agreements were for CEVA DSP cores, platforms and software, two agreements were for CEVA Serial Attached SCSI (SAS) technology and one agreement was for phase-locked loops (PLL) technology. Target applications for customer deployment are LTE and 3G data cards and handsets, wireless machine-to-machine applications, broadband residential gateways, solid-state drives (SSDs) and SAS-based storage equipment. Geographically, three of the agreements signed were in the USA, five were in Europe and one in Asia.

Gideon Wertheizer, Chief Executive Officer of CEVA, stated, "Our strong fourth quarter results were driven by strategic licensing agreements for next generation wireless products and the continued expansion of our DSPs in the wireless handset space. Our value proposition with a diversity of product offerings and strong customer relationships led to our worldwide DSP market share in handsets to increase to a record high of 27%, based on worldwide quarterly shipments in the third quarter of 2009."

Mr. Wertheizer continued, "Our licensing agreements for the fourth quarter of 2009 included three design wins for long term evolution (LTE), the next generation wireless standard for mobile Internet. Notably, one of the LTE agreements was with a first tier original equipment manufacturer (OEM) who will use CEVA's technologies across its product lines for the first time. Needless to say, we are excited about the long-term prospects of this relationship. Another LTE agreement was for our newest CEVA-XC DSP core adopted by a leading company in the fourth generation cellular space. Overall, despite the challenging environment in 2009, we managed to significantly increase our profitability and execute on our long term business and technology goals. We believe CEVA is well positioned to exploit the stabilized and improving business environment in 2010 as DSPs become the critical technology for the digital era."

CEVA Full Year 2009 Review

Total revenue for 2009 was $38.5 million, a decrease of 5% compared to $40.4 million reported for 2008. The $38.5 million in 2009 revenue was near the high end of the range given as guidance three months ago. Royalty revenue for 2009 was a record high of $16.2 million, representing an increase of 13% compared to $14.3 million reported for 2008. Licensing revenue for 2009 was $18.8 million, a decrease of 14% compared to $21.7 million reported a year ago. A total of 34 new licensing agreements were signed in 2009, compared to 30 agreements in 2008. Shipped units by licensees increased 9% to a record 334 million in 2009, compared to 307 million units in 2008.

GAAP net income and diluted earnings per share for 2009 was $8.3 million and $0.41, a slight decrease of 3% and 2%, respectively, compared to $8.6 million and $0.42 reported in 2008.

Yaniv Arieli, Chief Financial Officer of CEVA, stated, "During the fourth quarter of 2009, CEVA was able to generate record high royalty revenue. This continued royalty revenue progress is clearly reflected in the Company's record full year 2009 financials with total royalty revenue up 13% year-over-year, combined with significant profitability and net income per share improvements. We also managed to generate positive cash flow of $16 million during 2009, thereby strengthening our balance sheet considerably. As of December 31, 2009, CEVA's cash balances and marketable securities were $100.6 million."



On January 28, 2010 MIPS Technologies, Inc. (Nasdaq: MIPS) reported consolidated financial results for its second fiscal quarter of 2010 ended December 31, 2009.

Revenue for MIPS' second fiscal quarter (fourth calendar quarter) was $15.190 million, a slight increase of 1.4% over the prior sequential quarter revenue of $14.980 million and a decrease of 25.3% from the $20.335 million reported in the second fiscal quarter a year ago. MIPS revenue of $15.190 million in calendar Q4 2009 came in below the bottom of the revenue range given as guidance three months earlier.

Revenue from royalties was $11.4 million, an increase of $1.6 million or 17% from the prior quarter and a decrease of $1.2 million from the $12.6 million reported in the second quarter a year ago. License revenue was $3.8 million, a decrease of 27% from the $5.2 million reported in the prior quarter and a decrease of 51% from the $7.8 million reported in the second quarter a year ago.

The Company's fiscal Q2 GAAP net income from continuing operations was $3.277 million or $0.07 per share. This compares with a net income of $0.595 million or $0.01 per share from continuing operations in the just prior quarter, and a net income of $0.051 million continuing operations in the second quarter a year ago.

"Royalty revenues and earnings per share improved as expected in the second quarter despite a challenging European and North American licensing environment," said Maury Austin, MIPS Technologies chief financial officer. "With the CEO search now behind us, we are focused on growing our license revenue. We are well-positioned for growth as we look ahead, with an accomplished new CEO, innovative technology, and a management team that is very focused on winning."

MIPS Technologies announced on January 25, 2010 that Sandeep Vij had joined the Company as president and CEO. See News Highlights at the beginning of this February 2010 Electronics IP Industry Commentary.



On February 4, 2010 MoSys, Inc. (NASDAQ: MOSY) reported financial results for the calendar fourth quarter and the year ended December 31, 2009. Total net revenue for the fourth quarter of 2009 was $3.543 million, up 5.20% compared with $3.368 million for the third quarter of 2009 and down -10.53% compared to the $3.960 million for the fourth quarter of 2008.

Fourth quarter total revenue included licensing revenue of $1.3 million, compared with $1.3 million in the previous quarter and $0.9 million for the fourth quarter of 2008. Fourth quarter 2009 license revenue primarily consisted of new and ongoing interface IP projects as well as a new 1T-SRAM project with ROHM, a major Japanese IDM. Royalty revenue for the fourth quarter was $2.2 million, compared with $2.0 million for the previous quarter and $3.1 million for the fourth quarter of 2008.

GAAP net loss for the fourth quarter of 2009 was $4.892 million, or ($0.16) per share, compared with a net loss of $5.048 million, or ($0.16) per share, in the previous quarter and a net loss of $6.412 million or ($0.20) per share for the fourth quarter of 2008.

Full Year 2009 Results

Total revenue for 2009 was $11.5 million, compared with $14.0 million for fiscal 2008. Net loss for the year was $19.1 million, or ($0.61) per share, compared with a net loss of $18.6 million, or ($0.59) per share, in 2008. Earnings per share for 2009 were computed using approximately 31.2 million shares.

“During 2009, we implemented several strategic initiatives that have strengthened our organization and positioned MoSys for future growth,” commented Len Perham, MoSys' president and CEO. “In particular, we reorganized our corporate structure to increase efficiencies, reduced operating costs on a year-over-year basis, focused resources on our core product lines and furthered the development of our long-term product road map. Through our acquisition of Prism Circuits, we expanded our product offerings to include silicon-proven high-speed interface IP, which has broadened our customer base and engineering capabilities and significantly increased our total addressable market. As a result of these efforts, we grew licensing revenue over the prior year and signed eight new customers for our IP in 2009. We have established the foundation for expanding our business to become a fabless semiconductor company, as well as a differentiated IP provider.

“We recently announced plans for the Bandwidth Engine family of integrated circuits. As the industry's first serial chip-to-chip communications solution for advanced networking devices, this innovative product offering will provide unparalleled bandwidth performance, while addressing the performance challenges of next generation networking systems. Bandwidth Engine combines the fast random access and low latency of our 1T-SRAM with a serial I/O that operates at a data rate of 10 Gigabits per second. We expect sampling to begin in late 2010 with production quantities available in the first half of 2011. We are currently working with multiple potential partners to support the Bandwidth Engine as we bring this revolutionary new solution to market.”

Mr. Perham concluded, “We enter 2010 with a more efficient organization to meet current and future customer needs with expanded technology offerings and engineering capabilities enabling us to capitalize on a wider range of targeted growth opportunities in the networking, communications and consumer markets. Looking forward, we believe our new strategic direction will expand our addressable markets, broaden our product offerings and position the Company for future growth.”



On January 28, 2010 Rambus Inc. (NASDAQ: RMBS) reported financial results for the fourth quarter and the fiscal year ended December 31, 2009.

Revenue for the fourth quarter of 2009 was $30.816 million, up 10.6% sequentially from the $27.874 million in the third quarter of 2009, but down 18.1% compared to the revenue of $37.613 million in fourth quarter of 2008. The $30.816 million in Q4 2009 revenue was just above the top of the range given as guidance last quarter.

Net loss for the fourth quarter of 2009 was $23.293 million, a slight improvement compared to the net loss of $27.496 million in the third quarter of 2009, but far worse that the net loss of $15.495 million in the fourth quarter of 2008.

Net loss per share for the fourth quarter of 2009 was $0.22 as compared to a net loss per share of $0.26 in the third quarter of 2009 and a net loss per share of $0.15 for the fourth quarter of 2008.

Revenue for fiscal year 2009 was $113.0 million, down 20.7% over the last fiscal year. Net loss for fiscal year 2009 was $92.2 million as compared to a net loss of $199.1 million for fiscal year 2008. General litigation expenses for fiscal year 2009 were $55.5 million, a decrease of $0.2 million from fiscal year 2008.

Net loss per share for fiscal year 2009 was $0.88 as compared to a net loss per share of $1.90 in fiscal year 2008.

“We finished the year with good revenue momentum in the fourth quarter thanks to stronger patent and technology royalties from consumer electronics shipments,” said Harold Hughes, president and chief executive officer at Rambus. “The agreement signed last week with Samsung Electronics is transformational for Rambus and will accelerate the market adoption of our patented innovations and leadership products.”



On February 3, 2010 Virage Logic Corporation (NASDAQ: VIRL) reported its financial results for its first fiscal quarter and the fourth calendar quarter ended December 31, 2009. Total revenue for calendar Q4 2009 was $21.658 million, a huge sequential increase of 64.72% over the $13.148 million in calendar Q3 2009, and an even more impressive year-over-year increase of 90.84% over the $11.349 million in calendar Q4 2008. The $21.658 million in calendar Q4 revenue exceeded the $19.0 million top of the range figure given as calendar Q4 revenue guidance last quarter by some 14%. It's also worth mentioning that Dr. Alex Shubat, Virage Logic's president & CEO, was hinting at beating even that revenue guidance as early as November 9, 2009 in the interview with this writer for the EDA Weekly, “Virage Logic -On the Move”.

License revenue for calendar Q4 2009 was $16.9 million, compared with $8.5 million for the same period a year ago and $10.9 million for the just prior quarter. Royalty income for calendar Q4 2009 was $4.7 million, compared with $2.8 million calendar Q4 2008 and $2.2 million for the just prior quarter (calendar Q3 2009).

Virage Logic's GAAP net loss for calendar Q4 was $2.2 million, or ($0.09) per share compared to a net loss for calendar Q4 2008 of $2.6 million or ($0.11) per share, and net loss of $3.2 million or ($0.14) per share for calendar Q3 2009.

Virage Logic President and CEO, Dr. Alex Shubat said, “We are pleased with our record first quarter results, as they put us on track to achieve approximately 100% year over year revenue growth for fiscal 2010. We grew total license revenues by 55%, from $10.9 million in the prior quarter to $16.9 million in our first fiscal quarter. Our royalty income grew 114% from $2.2 million to $4.7 million. This strong increase in royalty income was a result of both increased wafer foundry utilization as well as royalties from our recent ARC International acquisition.”

“Fiscal 2009 was a pivotal year for Virage Logic and our first quarter fiscal 2010 results underscore the significant progress we made against the transformational goals we outlined in early 2007. The infrastructure and organizational alignments we made in fiscal years 2007 and 2008 enabled us to accelerate on our inorganic growth initiatives for fiscal year 2009 and beyond. Our recent acquisitions of ARC International and a portion of NXP's advanced CMOS IP portfolio in late fiscal 2009 were facilitated by these organizational changes. In addition, the increasing shift that large semiconductor IDMs are making towards a 'fabless' or 'fab-lite' business model have continued to play to our core strengths, enabling us to gain market share by serving as a Trusted IP partner to a broader account base. Finally, our continued focus on standard versus custom products and the deeper, strategic engagements we established with this expanded customer base has resulted in an increasing sales pipeline, both from a total dollar value and individual deal size. First quarter fiscal 2010 highlights of our continued progress against some of our stated transformation goals include:

Broadening our product portfolio to further establish Virage Logic as a single source provider of a broad line of semiconductor IP. Being first-to-market with next generation advanced technology products. We have expanded on our early leadership position at 40nm, and today have more than 20 customers actively designing SoCs at 40nm. We also continue our early leadership at 28nm, with the addition of two new end customers. As a result of our early leadership at these two advanced nodes, we believe our SiWare™ Memory, SiWare™ Logic and High Speed Interface products offer the industry's broadest portfolio of silicon proven IP.”

Dr. Shubat concluded, “We are encouraged by our first quarter fiscal 2010 results as well as our continued execution on critical key transformational initiatives. Today, our product portfolio has expanded to the point that our non-captive SAM (served available market) has grown from $200 million in 2007 to over a $1 billion in 2010. We are well positioned to serve as a single source supplier of a broad range of semiconductor IP, as evidenced by the increasing number of large, bundled, ratable agreements entered into with major IDMs and SoC providers. Our strong backlog, together with our solid sales pipeline and increasing customer engagements, will enable our company to enjoy record license revenue in fiscal 2010. In addition, we believe that revenue from royalties will continue to increase throughout fiscal 2010, as a result of strong growth in semiconductor wafer shipments.”

Stock Market Prices of the G6 Electronics IP Providers


Measured at the end of Q4 2009, Q3 2009 and Q4 2008, the combined G6 stock prices outperformed the NASDAQ Composite both sequentially and year-over-year. (All of the G6 firms are listed on the NASDAQ).

As shown in Table 3 below, the combined stock prices for the G6 increased 80.8% year-over-year and rose nearly 28% sequentially.

Relative to last year ARM and MIPS sock prices enjoyed over triple-digit percentage rises, with MIPS leading the percentage parade at +294%. The remaining four out-paced the NASDAQ's 44% rise, although Rambus managed to come closest at +53.3%.

Likewise, all of the G6 firms save Virage Logic outpaced the sequential 6.8% rise of the NASDAQ, with MoSys leading in percentage growth at 57.6% (on a small base), and RAMBUS close behind at +40.2%.




Recent Market Caps and Stock Prices


A look at the G6 stock prices and Market Caps since each firm announced its Q4 2009 financials, is shown in Table 4 below: These figures each came after the close of the U.S. markets on February 5, 2009:




Individual Company by Company Guidance


As guidance, Warren East described ARM as being "well-placed" for strong performance to continue. "Semiconductor manufacturers are increasingly designing ARM technology into their products, and as ARM technology becomes ever more pervasive in markets with long-term structural growth such as smart phones, digital TVs and microcontrollers," he said.

As guidance CEVA expects revenue in the next quarter (January - March 2010) to be in the range of $9.9 million and $10.9 million, compared to $10.18 million in the quarter just reported. GAAP EPS is forecast to be between $0.07 and $0.09.

As guidance MIPS expects revenue in the next quarter (January - March 2010) to be in the range of $16.8 million to $18.3 million. GAAP EPS is forecast to be between $0.05 and $0.07.

Spokespeople for MoSys said that the company as a matter of policy does not provide future guidance, yet these same people encouraged the writer to listen to the MoSys’ webcast earnings call. Unfortunately, the recording was unavailable by the time this writer tried to access the webcast.

Rambus executives gave guidance during the Rambus’ earnings conference call, that Rambus’ revenues for the January – March 2010 quarter would be between $47 million and $51 million. Perhaps half of this would be from royalties recently won in Rambus’ legal battles waged now for years to protect its Intellectual Property rights (see News Highlights above). Judging from the questions posed by investment analysts in on the earnings call, it would appear that most investors are focused on how much money Rambus can win in court battles, vs. winning in the technical market place. After all, Rambus has spent over $50 million in legal expenses in each of the last two years pursuing litigation to defend its intellectual property rights. And to Rambus’ credit, the two attorneys present for Rambus during the earnings call appeared extremely competent, careful and confident, on a par with the two top management Rambus executives who participated.

EDA Consortium's Market Statistics

 


The IP G6 represents about 19% of the revenue of the EDA Industry as a whole. But there is also IP-related revenue within the Big 3 EDA Vendors (Cadence, Mentor Graphics, and Synopsys, more now that Mentor Graphics recently absorbed LogicVision) that increases the industry's overall percentage of IP revenue compared to total EDA revenue. Unfortunately, the percentage of IP revenue from within the Big 3 is not unbundled for us to see, and thus goes unreported.

Nevertheless, it is worthwhile to compare the total IP revenue of the G6 providers, to that of the overall EDA Industry. For the latter, we have in recent times turned to the published results from the EDA Consortium, keeping in mind that the EDA Consortium reports EDA revenues that lag the Electronics IP Industry Commentaries' G6 IP revenue reports by one quarter.

On January 14, 2010 the EDA Consortium (EDAC) Market Statistics Service (MSS) published its results. According to EDAC, the calendar Q3 2009 revenue for virtually the entire Electronic Design Automation (EDA) industry was $1,167.9 million, a 3.8% percent sequential increase from Q2 2009, but a 7.2% decline compared to $1,258.6 million in Q3 2008. The four-quarter moving average declined more than 13%.

“Just as the semiconductor industry has experienced sequential growth, the EDAC revenue numbers similarly represent a sequential (Q3 2009) increase over the previous quarter (Q2 2009),” said Dr. Wally Rhines, EDAC chair and chairman and CEO of Mentor Graphics. “Most notable sequential increases were in the categories of printed circuit board, semiconductor IP, and services.”

Companies that were tracked by EDAC employed 25,942 professionals in Q3 2009, down 7.9% from the 28,176 employed in Q3 2008, and down 1.4% from the 26,298 employed in Q2 2009.

Revenue by Product Category

Computer Aided Engineering (CAE), EDA's largest category, generated revenue of $450.1 million in Q3 2009. This represents a 3.3% decrease over the same period in 2008. The four-quarter moving average for CAE declined 15.6%.

In the next largest category, IC Physical Design & Verification, revenue decreased to $260.8 million in Q3 2009, a 10.0% decrease compared to Q3 2008. The four-quarter moving average declined 16.9% for IC Physical Design & Verification.

Printed Circuit Board and Multi-Chip Module (PCB & MCM) revenue increased 1.5% compared to Q3 2008, to $132.9 million. The four-quarter moving average for PCB & MCM decreased 10.6%.

Semiconductor Intellectual Property (SIP) revenue totaled $240.7 million in Q3 2009, a 10.1% decrease compared to Q3 2008. The four-quarter moving average for SIP decreased 8.0%.

Services revenue was $83.5 million in Q3 2009, a decrease of 20.3% compared to Q3 2008. The four-quarter moving average for services decreased 4.0%.

Revenue by Consuming Region

The Americas, EDA's largest region, purchased $511.2 million of EDA products and services in Q3 2009, representing an 8.0% decrease compared to Q3 2008. The four-quarter moving average was down 14.1% for the region.

Revenue in Europe, the Middle East, and Africa (EMEA) was down 17.6% in Q3 2009 compared to Q3 2008 on revenues of $204.0 million. The four-quarter moving average for EMEA was down 15.4%.

Q3 2009 revenue from Japan decreased 2.3% to $248.9 million compared to Q3 2008. The four-quarter moving average for Japan decreased 15.1%.

The Asia/Pacific (APAC) region increased to $203.8 million in Q3 2009, a 1.6% increase compared to the same quarter in 2008. The four-quarter moving average declined 4.7%.


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About the Author of this Electronics IP Commentary:

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). Dr. Henke is also a contributing editor of the EDAcafé EDA Weekly.

Since May 2003 HENKE ASSOCIATES has now published a total of eighty-six (86) independent COMMENTARY 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, 2010 will mark the 14th Anniversary of the founding of HENKE ASSOCIATES.

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