May 31, 2004
Commentary: EDA Industry Update May 2004 -- What did the Last Quarter Bring?
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Table 2 - Eight Public EDA Companies' Latest Quarterly Earnings Performances
Net income for the reporting group of EDA vendors was down 66% sequentially this last quarter but up an impressive 48% from the first quarter in 2003 (Table 2). Overall earrings amounted to 3.2% of revenue versus 8.8% the previous quarter and 2.2% last year.
During the last quarter, Cadence and Verisity were the only firms to lose money. Synopsys had the largest profit by far in each of the reference periods. On a sequential basis, Synopsys earnings were down 11% but up 29% year-over-year. Cadence, Mentor Graphics and Verisity had significant earnings reverses over the previous sequential quarter due to the traditionally strong seasonal revenue performances in the fourth quarter of 2003. With respect to last year, Mentor Graphics, Nassda and Verisity had lower earnings. Cadence reduced its loss by a third. Magma was the earnings growth leader at 62% above last year's comparable quarter, followed by Synopsys at +30%.
Company by Company Q1 2004 details:
On April 21, 2004, Altium Limited, an Australian EDA firm, reported its results for the third quarter ending March 31, 2004. Revenues for the quarter were AUD8.6 million, down 14% sequentially and down 20% from the same period last year. (Altium had not provided a forecast for the quarter just ended). Altium does the vast majority of its business outside Australia (34% in the US, 20% in Europe and 9% in Japan). Therefore, currency exchange rates play a major factor. If reported in $US, total revenue was down 10% sequentially but flat year over year. However, actual revenues were in line with those of the 2003 March quarter due to the appreciation of the AUD versus the US dollar
(25% year-over-year). On a product by product basis, compared to quarter three 2003, Protel sales were up, P-CAD sales were down, and TASKING sales were flat, with the exception of a reduction in a long-term service contract.
In the financial year to date on a regional basis (in local currencies), US sales were down 7% and Europe sales were down 5%, while Japanese sales were up 3%, Australian sales were up 9%, and reseller sales were up 5%. Quarter three brought the total reported revenue (in AUD) for the year to date to $27.6 million, a drop of 17% compared the first nine months of the previous fiscal year.
During the March quarter Altium released three new versions of existing products and two new products, including Nexar which was launched at prominent industry tradeshows in the US, Germany, and China.
“The products we have released in the last quarter represent our greatest product development milestone to date and we expect to experience the benefits in the coming quarters,” says Kayvan Oboudiyat, Joint CEO, Altium. “Although sales were slow in January, they accelerated after the release of our 2004 products. We are also excited about the overwhelming response we received from customers and industry partners in response to the launch of our new Nexar product.”
On May 27, 2004, Ansoft Corporation announced financial results for its Fiscal fourth quarter and the entire year of Fiscal 2004 which ended April 30, 2004. Revenue for the quarter was $17.8 million, a 27% growth sequentially and an increase of 18% over the same period last year. The $17.8 million in revenue was 3% higher than the top end of the forecast range provided by Ansoft on February 18, 2004. Most of the growth was in the licensing versus the service segment. On a geographic
basis, North America accounted for 41%, Asia 42% and Europe 16%. The High Frequency product line contributed 67%, Electromechanical 19% and Signal Integrity 14%. The three largest customers in the quarter were NEC, Honeywell and Boeing. Net income for the quarter was $2.8 million, a 200% increase over the $941K the prior quarter and a 14% growth year- over-year.
For Fiscal 2004 revenue, was $54.6 million, a 15.5% increase over the $47.3 million in Fiscal 2003. The geographic and product segment breakdown was similar to the fourth quarter. The three largest customers in the year were Intel, Northrop-Grumman and NEC. The top ten customers accounted for less than 20% of revenue. Net income for the fiscal year was $2.5 million, a significant reversal form the loss of $3.1 million last year.
Nicholas Csendes, Ansoft's President and Chief Executive Officer said, “I pleased with quarter. All regions and segments returned to solid growth.”
On April 21, 2004, Cadence Design Systems, Inc. reported results for the first quarter of 2004. Total revenue was $266 million, down 14% compared to $307 million last quarter and flat compared with $263 million in the same period last year. The $266 million for Q1 2004 was in line with Cadence's forecast of January 28, 2004. Revenue splits by geography and product segment were consistent with previous quarters. North America accounted for 53% of revenue, Japan 22% and Europe 16%. Custom IC design accounted for 27%, Digital IC Design for 25% and Functional Verification for 20%.
On a GAAP basis, Cadence recognized a net loss of $9 million, or $0.03 per share in the first quarter of 2004, compared to a net loss of $13 million, or $0.05 per share in the same period last year. Cadence's Q1 EPS loss was a few cents worse than its forecast in February. On a non-GAAP basis (i.e. eliminate amortization of intangibles, deferred stock compensation and restructuring charges ), earnings were $28 million this quarter compared to $12 million a year ago.
The number of tape-outs with the full SoC Encounter flow grew to over 150, more than 30 of which were 90 nanometer designs. 70 percent of Cadence's software-based verification business was generated by sales of the full Incisive platform -- up from 50 percent for the prior quarter.
In April, Cadence completed its acquisition of Neolinear, Inc. This will presumably enhance the analog/mixed-signal and radio frequency capability in the Virtuoso platform, and deliver higher-performance designs, with improved yield, in less time for customers. Neolinear's NeoCircuit and NeoCell are already an extended part of the industry-leading Virtuoso platform through an OEM agreement between the two companies. Terms of the acquisition were not disclosed.
"We are gaining widespread customer support for our best-of-breed technologies, integrating them into platforms, and validating them through open collaboration," said Bingham. "Our focus is to deliver design automation solutions that generate more profit for our customers."
On April 29, 2004, Magma Design Automation announced its results for the fourth quarter and fiscal year that ended March 31, 2004. Total revenue for the quarter was a record $34 million, an increase of 66% compared to $20.5 million a year ago and an increase of 10% over the prior quarter. The $34 million of Q1 2004 was at the high end of Magma's forecast of January 29, 2004. License revenue of $29.5 million, 87% of total revenue, grew along these lines. Service revenue of $4.5 million grew at a much faster pace, 103% year-over-year and 25% sequentially.
Net income in Q1 2004 was $4.2 million compared to $2.6 million a year ago and $3.8 million last quarter.
“The fiscal year just concluded was a period of significant growth for Magma, in terms of financial performance, product offerings and market penetration,” said Rajeev Madhavan, chairman and CEO of Magma. “We again set records for revenue and profitability, and our product expansion during the year positioned us solidly in new segments, such as logic synthesis and signoff capability. It was also a year in which we became more deeply involved with the industry infrastructure, as we established or deepened relationships with key foundry, ASIC, IP and EDA partners.”
On April 22, 2004, Mentor Graphics announced results for the first quarter. Revenue was $164 million, down 19% sequentially and up only 3% over the same quarter last year. The Q1 2004 revenue was “just a tad” below Mentor Graphics' Q1 forecast of $165 million made in late January 2004. The reduced sequential quarter over quarter performance was driven largely by seasonality factors.
Japanese revenue was 25% of total, a level that Mentor Graphics has not achieved since the early 1990s. Revenue by region was 40% Americas, 25% Europe, 25% Japan, and 10% Pacific Rim.
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-- Dr. Russ Henke and Dr. Jack Horgan, EDACafe.com Contributing Editor.
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