June 12, 2006
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.
| 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!
This week's editorial covers several items that have been in the news but which individually did not warrant a dedicated editorial. The first section deals with legal issues which all too often play a significant role in the EDA industry. Some of the cases involve companies outside EDA but nevertheless have relevance for our community.
In a previous editorial I covered the
. Synopsys sued Magma for patent infringement based upon activities of Dr. Lukas van Ginneken, a former Magma employee. Magma subsequently counter sued that Synopsys was engaged in monopolistic practices.
On May 25 a U.S. District Judge Gregory Sleet in Delaware denied two motions filed by Synopsys the case against Magma and granted a third motion filed by Magma.
In the ruling the Judge denied Synopsys's motion to dismiss certain claims by Magma. Magma's claims said that Synopsys maintains monopolies in logic synthesis and scan chain insertion markets through anti-competitive conduct, according to court documents. According to Magma, Synopsys maintains a 91 percent share in both relevant markets and is acting anti-competitively by using the patent system and exclusive-dealing contracts to run Magma out of business.
In addition, the court denied another Synopsys motion requesting that the antitrust and patent infringement claims in the case be considered separately.
Research In Motion (RIM) de je vu
In a previous editorial
Please Don't Take My Blackberry Away- RIM Vs NTP - February 27, 2006 I recounted the patent infringement suit between RIM, the makers of the Blackberry, and NTP, a patent holding company. NTP sued RIM in November 2001. The matter went to trial in 2002 in the United States District Court for the Eastern District of Virginia and the jury issued a verdict in favor of NTP on November 21, 2002. On August 5, 2003, the District Court ruled on NTP's request for an injunction with respect to RIM continuing to sell BlackBerry handhelds, software and service in the United States and entered judgment with
respect to several previously announced monetary awards issued in favor of NTP. The District Court granted NTP the injunction requested; however, the District Court then immediately granted RIM's request to stay the injunction sought by NTP pending the completion of RIM's appeal. An agreement for RIM to pay NTP $450 million fell apart. The U.S. Patent and Trademark Office (USPTO) made several preliminary rulings that NTP's patents were not valid. Such rulings are subject to appeals from NTR. The judge made it clear that he would not wait for the PTO to finalize its decisions. In light of this and facing possible injunction against further sales of the BlackBerry RIM agreed to pay
$612.5 million to settle all claims. In return, RIM gets a perpetual license to NTP's technology.
On May 1, 2006 a second firm, Visto, filed suit against RIM for patent infringement in the federal court for the Eastern District of Texas, a court know to be favorable to patent holders. In fact this action comes on the heels of a successful suit in that district by Visto against Seven Networks. There the jury found that Seven Network not only infringed but did so willfully. The jury awarded Visto damages at a royalty rate equivalent to 19.75% of Seven's infringing products' revenue, or about $3.6 million. The court is expected to hold a hearing concerning an injunction against Seven Networks that would prohibit the further use of their infringing system. In this new case Visto is
seeking monetary damages as well as a permanent injunction that would prevent RIM from producing and selling its BlackBerry service in the US.
Visto has previously filed patent lawsuits against Microsoft (December 2005) and Good Technology (February 2006) and also against Smartner and Sproqit. In a press release RIM said “RIM believes Visto's patents are invalid. Further, Visto's patent claims as directed against Seven Networks refer to a different type of system than RIM's technology. RIM believes it does not infringe Visto's patents and will file its legal response in due course. In addition to challenging validity and infringement, RIM will now also consider asserting its own patents against Visto.” Jim Balsillie, RIM's co-chief executive, said the company wants the trial moved to the Dallas area where
RIM's U.S. headquarters are located, for practical reasons
Unlike NTP, a patent holding company, Visto offers products and services to end users. Visto is a ventured back company established in 1995. The company delivers a global platform for mobile operators to provide wireless push email to the broadest set of mobile devices. Visto's open solution enables email for the mass market, targeting large enterprises, small businesses, mobile professionals and consumers. Visto's customized, brandable solutions are available through mobile operators worldwide including Cingular, Elisa, KPN, Rogers Wireless, SmarTone, SFR, Sprint Nextel, TELUS Mobility and the Vodafone Group. Visto's products are used by over 200,000 mobile professionals globally.
Enterprise customers include GE, Sara Lee, USA Credit Union, and Xerox.
Interestingly, Visto and NTO signed a licensing deal in December 2005 granting Visto access to NTP's patented methods for sending and receiving wireless data. In addition NTP gained.
On a different front RIM is facing new competition from Motorola's Q smartphone.
Among Q's features are 1.3 megapixel camera, video capture and playback, dual stero-quality speakers, removable minSD cards, 52MB memory, Bluetooth and EV-DO high speed data. Moto Q also supports push email solution that synchronizes calendar, contacts, tasks and notes with enterprise email systems via MS Exchange, Goodlink, and Intellisync. Q is available from Verizon as part of a $199 bundle with a two year contract commitment
Motorola has been very successful with its RAZR and SLVR line of cell phones. Morolar expects to ship the 50,000,000th RAZR in this quarter. Cumulative SLVR sales are outpacing RAZR as measured from date of launch. Motorola has its own name licensing issues with Razor USA who has rights to the name. Motorola has filed suit so that it may use Motorazr after the current name licensing agreement ends in October.
eBay and the issue of injunction relief
In May 2003 a U.S. district Court jury sided with MercExchange of Great Falls, Va., which accused eBay in 2001 of infringing on three patents held by MercExchange founder Tom Woolston, an electrical engineer formerly of the NSA and CIA. Note that the two firms had active negotiation before the infringement began. GoTo.com since acquired by Yahoo! Agreed to license his technology after he sued. The verdict determined that eBay and its Half.com subsidiary willfully infringed on two of those patents with their "Buy It Now" feature for fixed-price sales. Merc was awarded $35 million for patent infringement. They requested an injunction which was denied by the District Court. They
appealed that decision. On March 16, 2005 the US Court of Appeals reversed the District Court stating that was a "general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances." The federal circuit did, however, grant eBay a stay of that decision while the company petitioned the Supreme Court.
On May 15, 2006 the U.S. Supreme Court unanimously reversed, in EBay v. MercExchange, and sent the case back to the district court to reconsider injunctive relief under the standard four-part test for an injunction.
The test requires a plaintiff to demonstrate; (1) that is has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. The decision to grant or deny such relief is an act of equitable discretion by the district court, review able on appeal for abuse of discretion.
Historically courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases. Large high tech companies supported eBay saying that they are under siege from small patent owners who use the threat of injunction to extract significant licensing fees.
In a separate concurring opinion Justice Kennedy wrote:
“An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.
For these firms, an injunction .. can be employed as a bargaining tool to charge exorbitant fees
When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient for the infringement and an injunction may not serve the public interest. In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods which
were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test”
One can only speculate on the impact this decision might have had on the RIM vs NRT case, if it had been issued earlier.
While our judicial system is the envy of the world, it is not without its faults. The appeals process is concerned with issues related to judicial error e.g. rulings by the trial judge on admissibility of evidence, the charge to the jury and possibly to prosecutorial misconduct such as failure to disclose to the defense exculpatory evidence. It does not concern itself with matters related to witness credibility. This is left to the jury to evaluate. Even if a key prosecution witness later recants his or her testimony, there is no guarantee that a convicted defendant will be set free or even granted a new trial. Also what happens to persons lawfully convicted of violating a law when the
appropriate legislative body later repeals that law or decriminalizes the activity? Think of the constitutional amendment for prohibition (18) and its subsequent repeal (21).
There is general agreement that because of insufficient resources both in numbers and in terms of specific expertise the patent office grants patents without sufficient study of prior art and often grants overly broad patents. The patent office may in response to a challenge subsequently rule that a patent was not valid. Such a decision may in turn be appealed by the patent holder. The final resolution could take years. What happens to a person or firm compelled by the court as opposed to voluntary settlement to pay for infringing a patent that is later ruled invalid? The terms of any settlement would be heavily influenced by anticipated court action and would likely cover the
possibility of a patent being later ruled invalid.
AMD versus Intel
Although there is a lawsuit between AMD and Intel, this section is about marketshare.
On May 18th Dell Computer announced that despite 6% growth in revenue to $14.2 billion its quarterly profit fell 18% year-over-year. Dell has had seven quarters of declining revenue growth and missed its own revenue predictions in three of the last four quarters. Dell has lost $40 billion in market value since last July. As a consequence Dell will cut $3 billion in cost and invest $100 million in sales and support. More interesting, Dell who had been exclusively Intel based announced that it would begin to use processors from AMD in its high end servers. Shares of AMD rose 12% in after hours trading.
In response to Dell's announcement Marty Seyer, AMD senior vice president, Commercial Business, said “We welcome Dell, and Dell customers, to the world of AMD64. Dell is a customer-focused company and we're pleased to see that they are listening to their customers and providing them the choice of innovative AMD products. We look forward to working closely with Dell in bringing the benefits of AMD leadership in performance-per-watt solutions to Dell customers.”
The table below compares AMD financials for the last two fiscal years which ended in late December. Year-over-year growth of 17% is certainly good. However, it is in the details where one sees the AMD growth pattern. AMD's Computation segment was up 50% over last year while its Memory segment declined nearly 20%. The Computation segment which includes PC processors and Chipsets accounted for 65% of total revenue while Memory accounted for 33%. For the first quarter of 2006 the Computation segment was up over 70% YoY.
According to Mercury Research Advanced Micro won 22 percent of shipments for the most common type of server chips in the first quarter, up from 16 percent in the fourth period. Also, AMD had 24.3% market share in desktops, commanded shipments of 16.4% of server processors and supplied 15.1% notebook central processing units. AMD's
microprocessor market share had reached 21.4% in the Q4 2005, the 5-year high for the company.
On May 29 AMD announced that it plans to expand its microprocessor manufacturing capacity over the next three years by adding additional 300 millimeter wafer production capabilities in Dresden through the implementation of three new projects. AMD's newest fabrication facility will come online through a major transformation of the company's existing Fab 30, which will be named Fab 38. The transition from 200mm to 300mm allows for more than twice as many processors on a wafer. In addition, AMD will also expand Fab 36's existing 300mm capacity and build a new clean room facility to handle the site's growing Bump and Test requirements, which is one of the final stages of the manufacturing
process where wafers are prepared to be shipped for packaging. With plans to invest a total of US$2.5 billion in the Dresden expansion projects, AMD continues to aggressively scale its innovative manufacturing processes to meet growing customer needs.
In fiscal 2005 Intel grew revenue by 13.5% over the prior year and increased net income by 15%. However, the Digital Enterprise segment which accounted for 65% of total revenue grew only 1.4%. This segment includes microprocessors and related chipsets and motherboards designed for the desktop and enterprise computing market segments, communications infrastructure and products for network and server storage. Year over year growth came mostly from the Mobility segment that accounted for 29% of revenue.
In the first quarter of 2006 Intel had revenue of $8.9 billion down 8% year-over-year and down 12% sequentially. Once again the Digital Enterprise segment had the largest declines. Intel expects revenue for 2006 to be approximately 3 percent lower than prior-year revenue of $38.8 billion.
Intel has responded to the threat from AMD by introducing its Core Microarchitecture. The design goals are world-class performance and superior energy/power efficiency. There will be a single foundation for each computing segment and power envelope: Woodcrest for servers, Conroe for Desktop, and Merom for Mobil. These will be launched in June-August 2006 timeframe. The firm expects new microarchitectures every two years: Nehalem in 2008 and Gesher in 2010 as the manufacturing moves from 65nm to 45nm to 32nm.
On May 23 Intel disclosed record breaking results on 20 key dual-processor server and workstation benchmarks based on the new Core Microarchitecture. According to the press release the Dual-Core Intel Xeon processor 5100 series (Woodcrest) delivers up to 125% performance improvement over previous generation dual-core Intel Xeon processors and up to 60% performance improvement over competing x86-based architectures, whilst also delivering performance per watt leadership. The results of the benchmarks can be seen on the
web site. The site also has links to server and workstation product roadmaps.
Sun Microsystems: Passing of the Torch, Changing of the Guard, Whatever at SUN
Sun Microsystems, once the darling of the stock market and a preferred hardware provider for EDA software, has seen its stock price go from a high of about $64 in September of 2000 to a range of about $3.50 to $5 over the past year. Revenues have dropped and losses have piled up.
Revenues for the third quarter of fiscal 2006 were $3.177 billion, an increase of 21 percent as compared with $2.627 billion for the third quarter of fiscal 2005. The year over year revenue increase was driven by recent acquisitions (Storage Technology Corporation for $4.1 Billion last summer) and by growth in traditional products. Net loss for the quarter was $217 million as compared with a net loss of $28 million a year ago. Net loss so far (9 months) this fiscal year was $563 million.
On April 24, 2006 Sun Microsystems announced the appointment of Jonathan Schwartz as the Company's chief executive officer to succeed company founder Scott McNealy, who will continue serving as chairman of the board and a full time employee, devoted to expanding market opportunities for Sun around the globe. Schwartz also retains the title of president. Schwartz joined Sun in 1996 upon the Company's acquisition of Lighthouse Design, Ltd., where he served as CEO. He was named Sun's president and chief operating officer in April 2004, and has been responsible for Sun's product development, sales, marketing and operations. Schwartz has held numerous positions at Sun including executive vice
president, Software (2002-2004), senior vice president, Corporate Strategy and Planning (2000 - 2002) and vice president, Ventures Fund (1999 - 2000).
McNealy founded Sun Microsystems along with Andy Bechtolsheim, Bill Joy and Vinod Khosla in 1982, and has been the icon for the 'open systems' movement. He was named Sun's chief executive officer and elected chairman of the board of directors in 1984. McNealy will focus his efforts on Sun's government and academic relationships globally, as well as expand his role with key strategic partner relationships. McNealy will also assume the role of chairman of Sun Federal, which focuses exclusively on U.S. government business.
On May 31 Sun announced that the company's board of directors had approved a growth plan with the goal of accelerating Sun's return to consistent profitability. The plan provides for increasing investment in core technology and channel resources, while accelerating acquisition synergies and disinvestments in non-core processes and research and development activities.
More specifically, the plan addresses several cost cutting initiatives including an 11-13% reduction in force and the consolidation of its real estate portfolio. The company is reducing the approximately 37,500 worldwide employee headcount by 4,000 to 5,000 people over the next six months and is selling its Newark campus and exiting leased facilities in Sunnyvale, Ca. The company will continue operations of its two major Bay Area campuses, Menlo Park and Santa Clara, Ca.
These initiatives are designed to focus and streamline the company and are expected to result in an annual cost savings between $480 million and $590 million, with the full impact expected to take effect by Q4 of Fiscal 2007. The company expects to incur restructuring charges ranging from $340 million to $500 million over the next several quarters in connection with the plan, the majority of which will be incurred in the fiscal quarter ended June 30, 2006. The company also stated its operational goals including a 4% operating profit margin by the end of next year, and 10% over time.
The response from industry analysts has been that the job cuts are long over due and not deep enough. McNealy had resisted the call for deep cuts for some time.
On the positive side according to Gartner Dataquest's Worldwide Servers Quarterly Statistics Database for Q1
Sun grew 7.6% year-to-year in overall worldwide server revenue; Sun is the only top-five server vendor to have positive revenue growth both year-to-year and quarter-to-quarter.
Sun moved to number one in worldwide UNIX server revenue with 31.4% of worldwide UNIX platform server revenue.
Sun is number one in worldwide UNIX server shipments with 51.2% of the shipments in this segment.
The years have not been kind to once high flying Silicon Graphics, an industry leader in computer grpahics and high perfromance computing.
In November 2005 SGI was delisted from the New York Stock Exchange (NYSE) because their common stock had fallen below the minimum share price for listing on the exchange. The stock began trading on the Over-the-Counter (OTC) securities market under the ticker symbol 'SGID'.
On Jan. 31 SGI announced today that Dennis McKenna had been named chairman of the board, chief executive officer and president, effective immediately. McKenna succeeds Robert Bishop, who will remain on the board of directors and serve as vice chairman. Bishop had held the positions for the last 6 years.
Prior to joining SGI, McKenna was the CEO of privately held SCP Global Technologies, a leading supplier of semiconductor capital equipment. Prior to his work with SCP, McKenna was chairman and CEO of ChipPAC, a global semiconductor manufacturing and services company with 6,000 employees. McKenna established ChipPac by leading an LBO, taking the company public in 2000 and initiating a $1.6 billion merger with STATS Singapore in 2004 to form STATS ChipPac. McKenna's previous management roles in the technology industry have also included executive positions with Hyundai Electronics America and Oki Semiconductor.
Almost immediatedly McKenna took decisive action reducing the workforce by 12 percent and implementing other cost-saving plans to lower debt interest, rent and leases. These cost reductions were estimated to save the company $100 million up front, and an additional $50 million by the end of the year.
On May 8th SGI announced that it has reached an agreement with all of its Senior Secured bank lenders and with holders of a significant amount of its Senior Secured debt on the terms of a reorganization plan that will reduce its debt by approximately $250 million, greatly simplifying its capital structure. As part of this agreement the firm filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York. SGI's non-U.S. subsidiaries are not included in the filing and will continue their business operations without court supervision. Certain holders of the Company's existing Senior Secured notes are providing SGI with a $70 million financing facility.
The Senior Secured notes represent a majority of the Company's total outstanding debt. Subject to court approval, the proceeds from the financing together with cash generated from daily operations and cash on hand, will be used to paydown a portion of SGI's pre-petition debt and to fund operating expenses including post-petition supplier payments, employee wages and benefits, and other operating expenses. SGI expects to emerge from chapter 11 reorganization within the next six months.
In published interviews McKenna blames SGI decline on being slow to adopt new technologies in the marketplace and on losing focus as a result of various acquistions.
In 1992 SGI acquired MIPS Techncologies and spun it out by distributuing its stock in 2000. In 1995, SGI purchased Alias Research and Wavefront Technologies and merged the companies into Alias|Wavefront, now known as Alias Systems Corporation. Later, in June 2004, SGI sold Alias to the private equity investment firm Accel-KKR for $57.1 million. On October 4, 2005, Autodesk announced that it signed a definitive agreement to acquire Alias for $182 million in cash. In February 1996, SGI purchased Cray Research, and began to use marketing names such as "CrayLink" for (SGI developed) technology integrated into the SGI server line. SGI later sold part of the Cray product line to Tera Computer
Company on March 31, 2000.
The top articles over the last two weeks as determined by the number of readers were:
New Czech Center of Excellence for Microelectronics Connects Talent From Central, Eastern Europe and Russia The Czech Republic announced its newly created Center of Excellence for microelectronics, ChipInvest, will supply top engineering talent from Central and Eastern Europe and Russia to leading and emerging chip companies worldwide. ChipInvest began as a partnership between the Czech Business Development Agency and Cadence in 2005 to support research-and-development of new chip technologies, emerging technology companies, and advanced training in integrated circuit design. ChipInvest is
headquartered at the Brno University of Technology.
EDA Consortium Elects Officers and Board Members
Aart de Geus, Ph.D., chairman and CEO of Synopsys, Inc., was elected chairman by the new board. Kathryn Kranen, president and CEO of Jasper Design Automation, and past chairman Walden C. Rhines, chairman and CEO of Mentor Graphics, were elected vice-chairmen.
SIA Raises Forecast for Chip Industry Growth; Worldwide Semiconductor Sales Will Grow by 9.8 Percent in 2006
According to the Semiconductor Industry Association's (SIA) updated forecast worldwide sales of semiconductors will grow by 9.8 percent to $249.6 billion in 2006. The forecast was revised upward from the November forecast projecting an increase of 7.9 percent to $245 billion. The SIA attributed the upward revision to stronger than expected growth in key end markets for semiconductors, most notably cell phones.
The revised forecast also includes more optimistic projections for industry sales from 2006 through 2009. According to the SIA, the industry will grow by 11.0 percent in 2007, 12.0 percent in 2008, and 4.0 percent in 2009.
Tharas Systems Appoints Carol Hallett as Vice President of North American Sales; Industry Veteran to Drive Sales of Hammer Family of Hardware-Based Verification Solutions
Prior to Tharas she was at Phoenix Technologies, Mentor Graphics and Tera Systems in sales roles. She was the vice president of Sales for TransEDA and RoyoCAD. She began her career at National Semiconductors and Surface Mounted Technology in various technical and operational roles.
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-- Jack Horgan, EDACafe.com Contributing Editor.