September 05, 2005
High Frequency Merger
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Jack Horgan - Contributing Editor

by Jack Horgan - Contributing Editor
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Hurricane Katrina

The enormity of the devastation caused by Katrina leaves one at a loss for words. There is little that can be added to the comments of the victim themselves. It is difficult to grasp the true magnitude of this disaster from the dramatic images on TV and in the newspapers. The impact of past hurricanes, tornadoes, floods, forest fires and earthquakes pale in comparison. The effects locally and nationally will be felt for years to come.

This catastrophe demonstrates our vulnerability both as individuals and as a society to the awesome forces of nature. It shows how helpless we are with all of our technology to prevent or even lessen the extent of the damage. Even our ability to communicate with omnipresent cellphones was cut off leaving many unable to locate family and friends and to get needed aid. Hopefully this experience will teach us how technology can be further developed to help us to be better prepared in the future.

There are heartbreaking stories of personal tragedies as well as stories of heroism and of people reaching out to help their fellow citizens. Events like this as if one can say that there are other events like this put into perspective what truly matters in life. Material possessions gathered over a lifetime can be lost in an instant.

Our deep sympathy goes out to all that have been impacted by this tragedy. We urge all our readers to keep the victims and their families in your prayers and to make whatever contribution you can afford to those agencies like the Red Cross and Salvation Army that have shown their effectiveness in supporting past relief efforts.

Introduction to Weekly Editorial

On July 18 Agilent Technologies Inc. Eagleware Corp., which does business as Eagleware-Elanix, announced they have signed a definitive agreement for Agilent to acquire substantially all of the assets and business of Eagleware-Elanix, a leading provider of system and circuit design software for the communications industry. Financial details were not disclosed. On August 18 the firms announced that the acquisition had been completed. Agilent's EEsof Division is recognized as a market leader - especially in high-end tools for the high-frequency EDA market. Eagleware-Elanix is noted for products that are easy to use and for their technological leadership in tools for high-frequency design
I had an opportunity speak with Neil Martin, Marketing and Services Manager of Agilent EEsof, and Todd Cutler, President and CEO of Eagleware-Elanix.

Before we talk about the merger let me get your comments regarding
the announcement by Agilent Technologies on August 15th that it was divesting itself of its Semiconductor Products segment for $2.66B, selling its stake in Lumileds for $950M and planning to spin of its SOC and Memory Test businesses as soon as practical in 2006. Bill Sullivan, Agilent president and ceo, said, "These actions enable Agilent to focus exclusively on realizing its full potential as the world's premier measurement company, serving global customers as the largest, most innovative and best-positioned entity in the world.” Do any of these moves have an impact on Agilent EEsof?

Neil: Not really other than it gives us a lot more focus as a company
Todd: This division is in a completely different organization unrelated to the semiconductor.
Neil: To correlate this with the announcement, we are in the Electronic Measurement Group which is the acronym that appeared in that announcement.

Does Agilent EEsof operate relatively independently within that group?

Neil: Agilent is divided first of all into groups and within those groups into business units and within the business unit there are divisions. We are a division within one of the business units. The divisions operate relatively autonomously meaning that the divisions have their own P&L accountability. Obviously there is a guiding strategy for the whole organization but the divisions define their own independent strategies, product development plans etc. But the accountability is totally held within Agilent at the division management level. Todd's and my boss is Jim McGillvary the VP and General Manager for the EEsof division. Eagleware-Elanix just became part of the EEsof division.

The acquisition announcement speaks of acquiring substantially all of the assets and business of Eagleware-Elanix rather than a merger. What is the significance of that?

Todd: It is not a stock purchase. It was an asset acquisition. There were various legal things to do one way or the other. Actually, it was a complete merger of the business. There is nothing left but a little shell corporation. There are some things that need to be done on the legal front but the lawyers make you word it just the right way. It was an asset buy rather than a stock buy.

A year ago I interviewed you (Todd Cutler) about Eagleware-Elanix. At that time you were proud of the fact that the employees owned the company by virtue of an ESPO. How did the employees make out in the deal?

Todd: Good question! Thanks for remembering. For shareholders be they employees or not it's is treated exactly the same. Part of the wrap-up we have to do is to deal with this issue. These people own stock as part of an ESPO (Employee Stock Ownership Plan). That's a Department of Labor, IRS regulated kind of place, an ERISA arrangement. We just have to wrap that up. But I think that the employees are pretty happy about this. They've got a lot of money that they were pleased to have in the end.

Neil: The other thing which was announced in the press release is that it was our intent from the very beginning to bring essentially all of the employees over. We are really pleased to report that now that we've closed it, we've essentially achieved what we set out to do. We have by far the majority of employees now as employees of Agilent EEsof.

Todd: Other than the founder and a couple of smaller positions, everybody was offered a position and everybody accepted a position. The whole team feels really good about the deal.

What was the motivation for this acquisition? The big three EDA firms general acquire smaller firms for their technologies?

Neil: There are a couple of things. The one thing we tried to explain in the press release is that it really fills a space in the market that we as Agilent EEsof did not effectively fill. The market has a perception that we have a certain price/performance point which tends to be up and to the right. The perception of Eagleware-Elanix is that in general they hold the price/performance point which is a little lower and to the left. It's been very, very difficult with a single platform to address the whole space. As proof of this we saw after we signed the deal and began to share more details that we have many large joint accounts that have a pretty good set of both products and are
using them, even though they are both in the RF design automation space. That was kind of a key motivator.

Another thing though is that they are a technology expertise company and we believe even more so complementary. The two companies started talking with each other in a very specific area which was synthesis. It was very clear that Agilent EEsof had virtually nothing in that space. Eagleware had a strong reputation for a set of products which addressed RF design synthesis which is kind of a new area in RF design. It has been around in digital design forever. We were interested in that. A lot of customers were saying that you need to get some synthesis. That was the nature of why the two companies originally came together. It was those initial discussions that blossomed
into “ Hey isn't there something bigger here such as an acquisition? ” Once we started to look beyond synthesis we were pretty surprised and pleased to find a number of other complementary technology areas.

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-- Jack Horgan, Contributing Editor.


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