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Synopsys Defines A New Market Reality That Works
August 24th, 2012 by Gabe Moretti
Shortly after the announcement of the Springsoft proposed acquisition, Daniel Nenni published a very accurate and complete matrix showing the intersection of the products offered by all three companies. Although there was never an explicit statement in the article about the direct dependency between success and consolidating the matrix, it was implied that Synopsys had significant technical work ahead of itself in order to financially benefit from the acquisitions. I think that Synopsys principal motivation was not technological but market driven.
The EDA industry is a mature industry. It is fair to argue about the technical characteristics of various products and to compare products directly. But leading EDA companies all offer competitive products that get the job done, albeit in different manner and with varied localized results. Were this not so, the companies would no longer maintain their standing in the industry. I am sure that Synopsys sales organization will not be confused about selling more than one verification product. And, in the end, equilibrium will be reached as one of the products will establish itself. In fact, creatig a new product by merging technologies can be disruptive to sales since change, as we have seen more than once, is threatening to a trusted design flow.
The Ciranova acquisition provides Synopsys with a more direct input into the iPDK consortium, and increases the weight of the Pycell libraries as an alternative to the Cadence proprietary Pcells. As far as Springsoft is concerned, Jay Vleeschhouwer points out in his message about the transaction to his subscribers, the acquisition is immediately beneficial to Synopsys’ bottom line.
Jay wrote: “For the year ended December 2011, Springsoft reported revenues of $77 million and operating income of $21.9 million, or an operating margin of 28.5%. As a smaller company, Springsoft spends a higher proportion of revenues on operating expense than Synopsys, including sales & marketing (29.7% vs. 23.6%), but its reported gross margin is higher. For the half-year through June 2012, Springsoft reported a 10% increase in revenues.” So, one hundred million here, one hundred million there and pretty soon we are talking about a company with an income of $2 billion or so.
If anyone still needed a confirmation that Synopsys’ strategy is working, it was delivered with the 3Q financial report this week. The company is on track to record income for 2012, with the possibility of reaching the $1.75 billion mark. Some of the highlights include: