June 21, 2010
WORKS IN PROGRESS: The Economy & EDA
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Ah, June 21, 2010. Summer started today at 4:28 AM PDT, just as this latest issue of EDA WEEKLY was first posted on EDACafe.com. In the United States, we are now closer to the upcoming Fourth of July celebration (13 more days) than the recent Memorial Day weekend (21 days ago). The birthday anniversary of our nation always engenders more optimism than the solemn duty of honoring those who have been lost.
Lest the title of this EDA WEEKLY be misunderstood from the get-go, it refers to both the recovery of the US economic situation along with the recovery of the EDA Industry: (1) both recoveries have been underway since early 2009; (2) both recoveries have been rudely and temporarily interrupted by very recent events; and (3) both recoveries need to be rapidly resumed once more. Thus the title refers to the ongoing WORK that has been leading to PROGRESS in both recoveries, and any glitches must now be righted to make still more PROGRESS going forward.
This issue of EDA WEEKLY will deal first with the interruption of the economic recovery. Then we will recount and analyze the current financials recently announced by each of the G5 EDA vendors.
Who or what is the “G5”? The current EDA “G5” or “Group of 5” consists of worldwide EDA Industry vendors Altium, Cadence, Magma, Mentor Graphics and Synopsys. These five publicly-held independent EDA vendors remain among a group of nine such vendors originally selected in 2003 by Henke Associates for quarterly coverage in EDA COMMENTARIES on IBSystems' EDACafe.com. (Since then, Ansoft, Nassda, Synplicity and Verisity have been acquired by ANSYS, Synopsys, Synopsys, and Cadence, respectively).
The sequel is divided into the following parts:
Part I. The Economic Environment: Progress Interruptus
Part II. Recent EDA-related News Highlights
The Now: How did the G5 EDA Vendors fair during the nominal First Quarter of 2010?
Part IV. Company by Company Q1 2010 details
Part V. EDA Vendor Q1 2010 Stock Performances
Part VI. Post-Q1 2010 Stock Prices
I. The Economic Environment: Progress Interruptus
In overcoming the ravages of the “Great Recession” (that officially started in December 2007), real progress became evident in Q3 2009, when the US GDP first turned positive after four quarters of negative growth. The middle of 2009 was also the time that monthly US job losses began to retreat steadily, actually turning to adding jobs in November 2009:
The positive economic news extended into the first three or so months of 2010.
overall US economy was improving steadily, with continued positive GDP increases, a positive slope to the New York stock markets through Q1 2010 and slightly beyond, along with the improvements in US non-farm payrolls each month, increasing worldwide semiconductor sales, increasing numbers of VC startup investments across the US, etc.
But then … well, readers may recall
the lyrical refrain from Joni Mitchell's hit song, “Big Yellow Taxi”:
Many of the positive economic signals changed during the third week of April - a real case of
Before those changes to the EDA-related economy are enumerated, let's first discuss how the sequence of economic conditions gets communicated in the writer's EDACafe.com articles.
In virtually every one of the four-score-and-nine quarterly COMMENTARIES published by Henke Associates since May 2003, whether they focused on MCAD/MCAE vendors, Electronics Intellectual Property (IP) vendors, or standard EDA Industry vendors, the then-current general economic climate of the times in which the vendors operated was described.
In 2010 alone, there have been fully six (6) such opportunities so far to comment on the then-current economic conditions:
In addition to the five COMMENTARIES mentioned above, the economy has occasionally been discussed in the monthly EDA WEEKLIES published by the writer since November 2009. For example, the economy was given special mention in the just-previous EDA WEEKLY posted May 24, 2010, entitled, “
The Economy, Semiconductors, EDA, & Intellectual Property,” which we will label here as article #6.
In the first three articles enumerated above, the US economy was indeed described as improving steadily, with positive GDP increases, a positive slope to the New York stock markets through Q1 2010 and beyond, improvements in US non-farm payrolls each month, increasing worldwide semiconductor sales, increasing numbers of VC startup investments, etc.
However, the last three articles listed in the foregoing began to mention the nascent signs of a changing economic environment. Number 4 described reductions in revenue and profit of the combined MCAD/MCAE G5 during Q1 2010 vs. sequential Q4 2009, but that reduction was dismissed as due to the traditional seasonal strength of Q4. Besides, each month more and more US jobs were being added during Q1, and MCAD/MCAE G5 Market Caps were mostly steady from January 1, 2010 till part-way into Q2.
Nevertheless, (1) the NASDAQ Composite Index had definitely taken on a downward slant in late April, (2) the peculiar and unexplained V-shaped stock market glitch had occurred on May 6, and (3) the then-downward slope of the NASDAQ (green line) was again mentioned in the ANSYS (blue line) section of article Number 4 (see chart below):
More negative economic signs:
By the time articles Numbers 5 and 6 above were posted, a couple of negative economic signs were plain to see and were duly reported in those articles. But the reader could be excused if s/he missed these reports (in the Footnotes), since every other economic data point mentioned for April 2010 was still positive.
On the negative side, the Footnotes did contain mention again of the V-shaped glitch with this graphic from May 6, 2010:
The resumption of the generally negative slope of the NASDAQ was also mentioned along with the decline of the euro vs. the dollar, but during that same May 8-9 weekend the Europeans announced their bailout package, and everything turned rosy for a few days.
However, article Number 6 ended by listing several caveats in Footnote 3 about negative impact of the euro's continuing decline and worsening Eurodebt:
Still, there was no mention in cited articles 1 through 6 listed above,
Deepwater Horizon explosion in the Gulf of Mexico on April 20, 2010 and the repeated British Petroleum (BP) failures to stem the massive oil spill over the next month and beyond.
That's because coverage of that tragedy in articles 1 through 6 was totally unnecessary, as there were and are massive reports 24/7 from every possible media outlet across the USA and the world. But just to remind the reader what the Deepwater Horizon disaster was/is all about, we present the following:
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-- Russ Henke, EDACafe.com Contributing Editor.
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