Rhines: roadmaps built on EDAC and Gary Smith

EDAC’s Market Statistics Service today announced Q4 2012 revenue and happily reported a 4.6 percent increase, year over year, compared with Q4 2011. Per the press release: “Sequential EDA revenue for Q4 2012 increased 9.8 percent compared to Q3 2012, while the four-quarters moving average, which compares the most recent four quarters to the prior four quarters, increased by 6.7 percent.”

Mentor Graphics Chairman & CEO Wally Rhines confirmed the industry’s good news in a phone call to discuss the MSS numbers. “A 6.7 percent increase is good and continues a reasonable mid-single digit trend in growth rate,” he said.

“Also, growth in the industry was pretty uniform around the world, except for Japan which showed a little weakness. Surprisingly, Europe was the strongest, while from a product category point of view, things remain strong across the front end, particularly in printed circuit boards. And interestingly, the survey data showed that the IP sold by EDA companies was stronger [in the market] than that sold by IP companies.”

Given the amount of effort put out by MSS to secure and analyze all of this data, I asked Rhines if companies actually change their behaviors based on what they see in these numbers.

He said, “Yes, it helps individual companies to figure out where they are. For instance, if you have some really good software but the market’s growing faster than you are, you have to figure out why. If you’re growing faster, however, then you know you’re doing something right.

“Meanwhile, the analysts use the data to see if people are doing more system design versus IC design, for instance, or if new processes are having an affect on how much software is being purchased. And importantly, one of the big uses of the numbers has been for startups who otherwise have no source of data to convince VCs that the market’s real, or growing fast, or whatever. For that reason, small companies have found the MSS numbers particularly useful.”

And what about big companies like Mentor? Do they find the numbers useful?

Rhines said, “For the big companies like Mentor that data is also important. We compare the quarterly numbers with the annual totals and with Gary Smith’s numbers, which typically come out 9 months into the current year, and we tweak our roadmap based on the data.

“We look at what markets are growing to see how our focus compares with that growth. At Mentor we have a policy of not spending much time in places where we are not Number 1, or close to it, so this is a strategic issue for us. These numbers are very important to us for that reason.”

I asked how companies know they can trust the accuracy of EDAC’s MSS numbers.

Rhines said, “The EDAC numbers are quite reliable and are reviewed by an independent accounting firm. Each company submits their numbers by product category. True, some adjustments have to be made there – if you don’t have at least 5 submitters in the category, you have to aggregate your numbers up to the next largest category – but the companies have a lot of motivation to be honest. If they distort their numbers or shift data from here to there, [there are always problems in the long run].

“The MSS committee then reviews the results and the auditors go through and check the independence of the inputs. They give out no specific information relative to the companies, but look at how data from any particular company compares against its competitors, and how it performs against the total market.

“Then at the point in the year when Gary Smith reports out, he makes sure the externally reported numbers are consistent with what he’s seeing. He goes back to the annual reports, uses the EDAC data, gets additional data to verify things, and then publicly reports out.

“At Mentor, we look at all of it – the numbers from EDAC and Gary’s report – to verify our own roadmap. We know it’s important, which is why we continue to believe that small companies should join EDAC and submit their data, because they get the full MSS report as part of their membership.

“Entrepreneurs have to go where the growth is, and this is one way for them to know where that is.”

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Today’s MSS Report …

The complete MSS report, containing detailed revenue information broken out by both categories and geographic regions, is available via subscription from the EDA Consortium.

Companies that were tracked employed 29,578 professionals in Q4 2012, an increase of 7.1 percent compared to the 27,623 people employed in Q4 2011, and up 2.4 percent compared to Q3 2012.

Revenue by Product Category

* The largest category, Computer Aided Engineering (CAE), generated revenue of $693.0 million in Q4 2012, which represents a 7.5 percent increase over Q4 2011. The four-quarters moving average for CAE increased 9.8 percent.

* IC Physical Design & Verification revenue decreased to $360.4 million in Q4 2012, an 8.2 percent decrease compared to Q4 2011. The four-quarters moving average increased 2.2 percent.

* Printed Circuit Board and Multi-Chip Module (PCB & MCM) revenue of $167.0 million represents an increase of 19.5 percent compared to Q4 2011. The four-quarters moving average for PCB & MCM increased 7.6 percent.

* Semiconductor Intellectual Property (SIP) revenue totaled $467.4 million in Q4 2012, an 8.1 percent increase compared to Q4 2011. The four-quarters moving average increased 7.7 percent.

* Services revenue was $91.3 million in Q4 2012, an increase of 0.5 percent compared to Q4 2011. The four-quarters moving average decreased 3.0 percent.

Revenue by Region

* The Americas, EDA’s largest region, purchased $767.1 million of EDA products and services in Q4 2012, an increase of 5.6 percent compared to Q4 2011. The four-quarters moving average for the Americas increased 7.4 percent.

* Revenue in Europe, the Middle East, and Africa (EMEA) was up 8.1 percent in Q4 2012 compared to Q4 2011 on revenues of $331.0 million. The EMEA four-quarters moving average increased 6.8 percent.

* Fourth quarter 2012 revenue from Japan increased 4.4 percent to $259.1 million compared to Q4 2011. The four-quarters moving average for Japan decreased 3.0 percent.

* The Asia/Pacific (APAC) region revenue increased to $421.8 million in Q4 2012, an increase of 0.5 percent compared to the fourth quarter in 2011. The four-quarters moving average increased 12.5 percent.

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Tags: EDAC, EDAC Market Statistics Services, EDAC MSS, Gary Smith, Mentor Graphics, Wally Rhines

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