January 12, 2009
Sequential Analysis
Please note that contributed articles, blog entries, and comments posted on EDACafe.com are the views and opinion of the author and do not necessarily represent the views and opinions of the management and staff of Internet Business Systems and its subsidiary web-sites.
Jack Horgan - Contributing Editor

by Jack Horgan - Contributing Editor
Posted anew every four weeks or so, the EDA WEEKLY delivers to its readers information concerning the latest happenings in the EDA industry, covering vendors, products, finances and new developments. Frequently, feature articles on selected public or private EDA companies are presented. Brought to you by EDACafe.com. If we miss a story or subject that you feel deserves to be included, or you just want to suggest a future topic, please contact us! Questions? Feedback? Click here. Thank you!


Before we begin with the usual interview, a few words are in order about 2008. A detailed analysis will be forthcoming in our Quarterly report after the firms release their financial results for the last quarter. Unlike the Frank Sinatra song, 2008 was not a very good year for EDA or for that matter for few other sectors of the economy. As is well known, as the Big Three go, so goes EDA. Without the financial results for the last quarter, perhaps the best way to characterize the industry is by their stock prices.

Synopsys stock price followed the NASDAQ closely. Mentor Graphics’ stock price rose dramatically when Cadence made an offer to acquire them on June 17th at a 30% premium over the closing price the day before. And, of course, the price dropped back down when the proposal was withdrawn on August 15th. At the end of January Cadence stock dipped after the company missed Wall Street's fourth-quarter revenue expectations and guided the Street lower for 2008. On October 15th several top executives at Cadence including CEI Mike Fister resigned. On October 22nd Cadence announced review of revenue recognition which was completed by December 12th. These events had significant impact on
Cadence’s stock price. More details appeared in our Third Quarter Review currently seen on this website.

The Big 3 have significantly different views on the upcoming quarter. Cadence is forecasting a 50% drop in revenue next quarter compared to the first quarter in 2008 and a drop of around 17% for next year versus the current year. Mentor Graphics sees a 5% drop in revenue in the next quarter versus the year ago quarter. For fiscal 2009, Mentor Graphics expects full year revenues of approximately $815 million, less than the $879 million in the previous fiscal year. Synopsys, the most bullish of the three, forecasts a 6.7% year-over-year increase for the next quarter.

The economy is impacting every one. If sale of consumer goods (cell phones, TVs, cameras, computers ..) are down and they are, this will impact many EDA end user companies, who will likely downsize. For example, on January 7th Intel made a preliminary announcement that its fourth quarter revenue would be 23% below the fourth quarter last year, 20% below the previous quarter and $500 million below its forecast as a result of further weakness in end demand and inventory reductions by its customers in the global PC supply chain. Similarly on December 4th, AMD announced that it expects revenue from continuing operations for the fourth quarter to be approximately 25 percent lower than third
quarter 2008 revenue of $1.585 billion, not including process technology license revenue. They stated that the decrease was due to weaker than expected demand across all geographies and businesses, particularly in the consumer market. In addition to reduced demand for their product, end user firms may have suffered considerable losses in their investment portfolios.

One can argue that this is precisely the time for end users to acquire more tools aimed at driving productivity. But if the end users already have all-you-can-eat contacts with the ability to mix and match product licenses, that opportunity may already be built in.


In November Calypto Design Systems Inc. announced that the latest

version of SLEC™ supports fixed-point datatypes and system-level memory interfaces commonly used in wireless, video and image processing SoC designs. Product lines SLEC for functional verification and PowerPro for power optimization are based upon based on Calypto’s patented sequential analysis technology. I had an opportunity to discuss the products, technology and the market with Calypto CEO Tom Sandoval

Would you provide us with a brief bio?

Sure! My background is mainly in semiconductors. I started out as a designer myself. I moved into sales and marketing. I also ran LSI’s worldwide engineering organization. I actually spent 10 years at LSI Logic prior to coming here to Calypto. My background is in digital design as well as support and development of methodology in digital design.

Would you tell us about the formation of Calypto?

The original thesis of the company was developed with the founders and venture capital. The idea was to take sequential analysis capability and see if there was a way to take that to a useful product. Originally, there was certainly the idea that sequential analysis could be taken in a number of different directions to support digital design. The folks decided to initially concentrate their efforts on using sequential analysis for formal verification of digital circuits at the system level. Our original SLEC product was able to take a system level model written in C, C++ or SystemC and verify that the model is in fact equivalent to an RTL implementation. There were many naysayers early
on that thought that the technology would not be able to scale in terms of the size of the functions. The reason for that is, of course, as you start increasing the state-space, it becomes a bigger and bigger problem and it becomes difficult to constrain the memory size that you have to address. With the technology we have in place here, we have been able to do that.

The second thing the company did was we took that sequential analysis technology and applied it to power. We can analyze, in this case, an RTL model using our sequential analysis technology and determine where we can instantiate clock gating within the design. We have basically two product lines: our verification product line that I was describing earlier and our power product line.

If I have my dates right, the company was founded in 2005 and you joined them in 2006. What attracted you to Calyoto?

The company was originally founded in December 2002.

Like I said, 2002.

When I joined the company in January 2005, they were just moving from the state of being involved in technology development to actually having product that was being sold and marketed into potential customer base. What attracted me to Calypto was the fact that they were doing something very different from other EDA companies. If you are going to get into the EDA market, your products have to be in a space that does not compete with the Big Three. I felt that because the approach was unique and because they were going off to tackle a problem that had not tackled before that it would be an interesting challenge and I also found that the technology was solving real problems that needed to
be solved.

You have been at Calypto for a few years now. Were there any major surprises?

Let’s see. I guess coming from a semiconductor environment and going into EDA, one of the biggest surprises was the lack of openness that certain companies are willing to expose adopting new technology. In some cases market leaders that you would expect would be open to new technologies being absolutely closed to looking at new things and continuing to do things as they always had.

Is that because they have their own internal tools?

I think some companies have an inherent personality for things different, always pushing to ensure that their designers are in fact always working with the latest and greatest tools as opposed to companies that are so concerned with cost and with risk that they tend not to be that interested or that open to adopting new ways of doing things.

The risk-reward ratio is not favorable for their business model?

Or it could be favorable to their business model but some of them still sit pat. They have a nice share of the market and they are more concerned about maintaining that share of the market than growing it.

What do you see as your biggest challenge now at Calypto?

I think the challenge for all of us in EDA is twofold. First of all, the business model that has been developing over the last several years really driven by the Big 3 has made it increasingly difficult for small companies that are technology driven to justify a spend based upon a value proposition as opposed to a business proposition. In other words when the Big 3 go off and try to cut deals, they are cutting deals based upon putting together a good business proposal as opposed to pushing a particular technology that can make a difference to the customer. The second challenge I think for our business is actually the economic
climate we are facing. Are companies going to be willing to spend additional money to adopt new technologies that could make a dramatic difference in how they are designing while at the same time being concerned about keeping their costs down and maintaining their employee base?

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-- Jack Horgan, EDACafe.com Contributing Editor.


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