September 05, 2005
High Frequency Merger
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| by Jack Horgan - Contributing Editor
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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.
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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.
Todd: We have some pretty interesting technologies given that we were a smaller company. We really had to stretch to get it to the customers and get the word out. Some of the things Neil talked about are technologies to solve different customer problems. Getting the word out and getting it into the hands of customers was a real challenge. I think the thing that the development team in particular is very excited about is that the cool technologies they develop should be able to be adopted a lot more readily by our customer base. That results in more benefits for the customer and more revenue for Agilent. That's why this was a good thing to do and why it made more sense from both sides.
Neil: From a channel perspective Agilent EEsof has a direct channel in virtually very major region or major country in the world. Local sales team, local support teams. We can deal with the customers in their local language and do business internationally. Eagleware-Elanix has a very large direct sales force in the US but I think it struggled more to proliferate their technology internationally. There was a clear fit here, channel leverage for Eagleware-Elanix technology.
Does that imply changes in the way Eagleware-Elanix product will be distributed?
Todd: You have these great sales offices, sales people, application engineers, support engineers all around the world. It sort of makes me salivate because we are so better able to support customers internationally than we've ever been in the past. You'll also get better coverage and better relationships through people that live in your town and do not have to fly from half way across the country. I think that the customers will see a huge benefit in the level of support they are getting, the ability for us to get it out. The plan is to pull these two channels together and to function as a single company.
Overseas did Eagleware-Elanix have distributors or Value Added Resellers (VARs)?
It was all done with distributors who would carry some number of products, generally not in this exact space; some other EDA space or possibly in components or in some other area. Everything was done by distributors. The distributors had things to worry about in addition to high frequency design automation. The benefit now is that we will be selling through people who only worry about high frequency design automation.
Is the price point of Eagleware-Elanix products such that it can support a direct channel?
Neil: Yes we believe so. One of the things is that Agilent as a company sells products that have a wide range of prices. One of the things we have to be careful about is to make sure to utilize the channel as efficiently as possible but even today we have a number of products.
We have a large installed customer base to whom we sell much lower priced add-on products. We have a pretty wide range of price points in our price list. Agilent is a company that has a lot of experience in selling. Eagleware-Elanix is very efficient. One of the keys is that we are going to have to maintain that efficiency. Eagleware-Elanix made great use of the web internationally to get broader reach and broader coverage where they couldn't sell directly. We have no intention of changing that.
I do want to put a point in here. Eagleware-Elanix does use distributors. We are going to make a very careful transition. In a lot of places the distributors have been in place for a long time and have very good relationships with customers. The loyalty that customers have to Eagleware-Elanix is something we really want to preserve. We are going to make that transition as carefully as possible. We do not want to send a signal that the walls are going to slam and that there is not going to be an attempt to work carefully with them and with the customer relationships they have.
Speaking of customer, what has been the response since the announcement particularly by Eagleware-Elanix?
Todd: It's mixed. There are pluses and minuses any time there is a change. There's fear that when new people come in. People feel “Gee, does this mean that prices are going to go up or that the quality of support will go down? I'll never see enhancements into the new product.” There are natural fears that come up, ones that we are trying to address with the help of people like you. There is no plan to increase prices. In fact it looks like we are going to be staying where we are and keep this going. The support for crying out loud Agilent has been one of the top rated EDA vendors in customer support for years. We don't see any reason to have that go down. In
fact we think it will go up. Just get better coverage in local languages and local time zones. A much better story. When it comes to technology, is it going to slow own? No! We don't think it will slow down. We have access to more technology. We can work together as part of a larger team. I think that people have some of these fears and I can see why they do have them. But before we got into this deal we spent a month or so and all the signals were there that we want to keep the product being developed. The number one objective is to keep our existing customers happy, satisfied and buying more from us.
Neil: We are realistic. We can say any thing we like. But the customers are going to measure us by what we do. We are really focused on execution. Eagleware-Elanix had committed to introducing a very significant release by the end of the year called Gensys2005. We are keeping that 100% on track. That is our number one priority from a product development perspective; to make sure that we introduce to the customers what they were expecting because that product had a lot of significant capabilities. At the end of the day that's how customers are going to measure us. Obviously we are going to say everything we can to reassure them and we will continue to do that. But it's what we do
that's going to count.
Todd: If I can tag team a little bit here. We're more than on track from a release standpoint. We think we will be able to speed it up since we have access to a great quality department, QA resources; things that as a smaller company we struggled with. There are more people that we can tap into to help make sure that the product gets out faster and better.
How much independence will the Eagleware-Elanix team have?
Neil: There will be much more separation on the R&D side because we are going to maintain the separate products. That's why we are doing this. It's a critical part of our strategy. At the same time we will try to do everything we can to leverage the infrastructure, the Agilent EEsof organization. Not only what we do in sales and out business center but also marketing.
Todd: The development team is staying intact, staying in the same place. Folks are doing more in development than ever before.
Neil: That team is based primarily in Atlanta. We are leaving the site in Atlanta intact.
As I recall both companies had operations in Westlake Village (northwest of Los Angeles), CA.
Neil: We have a fairly sizable operation there. It's almost the same size from an EEsof point of view as Santa Rosa. It was the original site of EEsof which was acquired by HP in 1993. The former Elanix company that was acquired by Eagleware in December of last year is also there. Those employees are moving over to the EEsof facility. It turns out to be less than a mile move.
Do you envisage any challenges in managing three operations, two California and one in Atlanta?
Neil: The short answer is no. Not more than we already do. We have an R&D team in Belgium, we have operations in China and India and we have some people in Singapore. So we're already pretty distributed internationally in terms of how we do development. Atlanta will become another site for us. We are pretty used to operating across geographies. It's always a challenge. It's much easier for everyone to be in the same place but we don't expect it's going to cause any significant challenges for us.
For Todd Cutler, what is your role on a go forward basis?
Todd: My role here for the next year is really to make sure this is a successful acquisition. We have a lot of knowledge that we need to transfer into the larger organization. I'm going to try to look out for all the different parts of the business, make sure that they are doing it. Ask the right sort of questions; provide the leadership that's really focused on this product line. I'm looking forward to it. It's a different set of problems to work on but I think it will be fun to do. Beyond a year, I don't know. We will figure that out, what makes sense.
Neil: Todd was former HP employee. The transition should be pretty smooth.
Todd: It's kind of interesting because I came back onsite for the first time in 7 or 8 years. I was walking in the front door and I had to think back. I joined HP right out of school on this site in '79 or so. To walk back into that facility felt like I was in school again. It was an interesting feeling.
Eagleware-Elanix will benefit clearly from the channel and from deeper pockets and more resources. Do you expect the combination to have a significance impact on your growth? How is the overall high frequency market growing?
Neil: We think that the market is not an extremely high growth market but it is a growing market. It's a market that both companies have been dedicated to for a long time. It's also a market that we feel will undergo a fair bit of change in the coming years.
The combined high frequency product portfolio of Agilent EEsof and Eagleware-Elanix covers device modeling, foundry PDK, RFIC design, MMIC (Monolithic Microwave IC) design, RF Board design, RF Module design and verification.
We certainly want to take advantage of the fact that it is growing and we want to be prepared for any changes in the market. There has been a lot of talk about high speed digital problems becoming signal integrity problems. There is increasing focus on the analog design side of the market. We think we are going to be in a better position to address that.
Can you comment on the size of Eagleware-Elanix, its revenue, install customer base, profitability and so on?
Todd: We've told people before the acquisition that we're about 40 people. We have always been a highly profitable business. That's one of the things that made us pretty attractive to Agilent who is also interested in making money. The number of customers and the number of seats we sold goes into the thousands. There are around 10,000 people actively using the product today. So we are pretty big payer over all in the market.
Same question for Agilent EEsof.
Neil: We don't disclose our financial numbers; however Dataquest has us as the #5 EDA company after Magma at this point. We don't disclose the number of user as well but Dataquest has had us for a long time with the largest user base in RF EDA. Together we have a very large base of users.
We've discussed the upcoming release of Gensys2005 for Eagleware-Elanix. Has there been or will there be any significant product release for Agilent EEsof in 2005?
Neil: We just started shipping our major releases for out two major product lines which are called ADS (Advanced Design System) and RFDE (Radio Frequency Design Environment). We met the schedule that we had committed to. We are currently on plan for the 2006 releases. The timing of Genesys is nice. It wasn't planned but its is falling between releases on the EEsof side.
Would you give me a brief overview of the releases?
Neil: For the 2005A product there has been a strong focus in this release on simulation. Agilent EEsof has been known for a very long time as a leader in simulation technology, a very large part of our R&D team is focused there.
As circuit sizes are going up so has the demands on the capacity of simulators to handle very large numbers of linear and non-linear devices. We play pretty heavily in the RFIC marketplace. The demands of this market have gone up pretty substantially so there has been a focus in this release on improving the simulation technology. We are pretty confident that we have made big advances in simulation. We have also been focusing on improving general usability, user interface improvements. That was a big focus for 2004A but we had a roadmap that we were continuing to follow in 2005. In our RF product we have a product that allows our simulation technology to run within the Cadence
environment. We've made improvements not only in simulation but also in foundry kit which is important for IC houses. We've improved our compatibility with respect to foundry standard process design kits. That's going to enable the foundries and we have a ton of them to provide design kits for use with our simulator. This is really going to speed up their ability to get new foundry kits out as they introduce new technology.
Agilent EEsof was itself acquired by HP. Since then and now have there been any other acquisitions?
Neil: We acquired technology from a company in Ghent, Belgium. That site is still there which provides our electromagnetic technology. We have a core part of our product line called Momentum. There have been significant at improvements in 2005A that I forgot to mention a moment ago. All of our EM technology is done by this team in Belgium. The acquisition was around 1997. That was an extremely successful acquisition and is a core part of our product line. Other than that, no acquisitions.
Any plans for future acquisitions?
Neil: Our goal is to introduce new technologies to our customers more quickly than in the past. We think that the key for this strategy is doing less of it ourselves. We still have and will continue to innovate ourselves. In fact one of the things that attracted us to Eagleware-Elanix is that they have done a lot of their own innovation which we are bringing into the company. But in addition to that we are much more open to working with third parties, much more open to a range of relationships from OEM agreements to acquisitions. In fact as I mentioned before the Eagleware-Elanix discussions kind of migrated into an acquisition. So there is none that I can tell you about specifically
other than to say that we are very open to that as part of our strategy. We've announced the alliance with Cadence. We have an alliance with CST (Computer Simulation Technology) who is a 3D EM supplier. There are a number of third party products that hip with our product. That's really been a conscious strategy change. We plan on continuing that.
Whom do you see as your company's primary competitors?
Neil: One of the things we believe that makes us unique in the RF space is that we do everything end to end form the RF EDA perspective. From device characterization which is critical to the foundries to system design and circuit design. What is important to us, since we are part of Agilent which is a leading test and measurement company, is that we do a lot of things in the design verification space where we mix hardware and software. I'm not trying to avoid your question. It just depends on which piece of that market we are talking about.
Let me focus on the part of the market where Eagleware-Elanix plays. We primarily play in a couple of different markets and very broadly speaking you could call it the circuit simulation market. In that market our primary competitors are probably Applied Wave Research and Ansoft that has a number of products although Ansoft's product line is really EM tools. If you walk around the NTT show there is just a host of small companies play in that space. In the system design arena, again a lot of what we do is focused on the RF part.
Todd: From a system design view the additional competitor is MathLab of course in the ESL space doing DSP level design. The old SPW and some things offered by Synopsys but these have not been receiving a lot of investment in recent years. There is a different set of competitors there.
Does this combination of firms make you more competitive?
Neil: Absolutely. Our strategy is that we want to grow at least as fast as the market as a whole. We would like customers to consider us first irrespective of their design needs and price/performance expectation.
Todd: At a more specific level it gives a boarder range of price/performance points that Agilent can offer. Other people say we are just as good but we cost less. We have a much broader range of coverage. We give Agilent a native Windows environment for people who really prefer to be operating on something that smells of Word or something like that; a true native Windows environment. I think that those two really allow customers more choices and they can really pick the right deign environment that meet their particular needs and at the right price/performance point.
Any additional comments that you think my readers will be interested in?
Neil: From my side we announced that we had closed last week. So we are literally a week into operating as one company as opposed to two companies. We're just really excited about it. Our employees are excited about it. We have a lot of work to execute this. We are sensitive about what's required to make an acquisition successful. It's not trivial. But we believe that it will be successful.
The top five articles over the last two weeks as determined by the number of readers were
Synopsys Applauds Court Ruling in Patent Suit; Magma Says Reaction Premature (Electronic News Magazine)
In his ruling U.S. District Judge Maxine M. Chesney adopted Synopsys' positions outright on three of the four claim construction questions at issue in the patent lawsuit brought by Synopsys Inc. against Magma Design Automation Inc.
Accellera Approves New Open Verification Library Standard
The OVL standard results in better quality HDL (hardware description language) designs, since the pre-defined checkers, written in either Verilog or SystemVerilog, allow designers to take advantage of assertion-based verification immediately. Both SystemVerilog and Verilog language-compliant tools can take advantage of this new verification standard.
Survey Shows Hidden Market for ESL and FPGA; Electronic System Level Design and FPGAs Are the Big Winners in This Year's Worldwide Survey on Designer Trends
The survey, conducted by Electronics Weekly and Celoxica showed more than 40 percent of the market is outside the realm of hardware and semiconductor design, none of which are regularly polled by traditional analysis. Headlining the survey 58 percent of designers recorded intent to increase their use of ESL design, with SystemC usage set to increase three-fold in next design projects.
Mentor Graphics Calibre Extracted View Interface Completes Integration to Cadence Design Creation Environment
By extending Calibre Interactive to include the Calibre extracted view, designers working on analog and analog/mixed-signal chips can now perform post-layout analysis and simulation for accurate nanometer silicon modeling.
Intel to roll out new, power-efficient chips (Reuters)
Intel is combining its desktop and notebook microprocessor architectures in order to shift its focus to power efficiency from raw speed.
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-- Jack Horgan, EDACafe.com Contributing Editor.