Siemens snags Mentor: Cartel canceled, Gary Smith vindicated

Today is the day some EDA purists thought would never happen: The disassembling of an industry status quo that’s been in place for over 20 years

As of today, Mentor Graphics has been sold and is fully owned by Siemens. Now Mentor’s arc of history will be decided by folks not residing in the green forests and hills of northern Oregon, and the Big Three cartel is no more. A cartel which has slowly consolidated the playing field over time until nary a startup can be seen.

The power vested in the Big Three EDA companies has grown steadily and inexorably over these years, as has their market dominance. Examination of recent numbers provided by the ESD Alliance Market Statistics Service indicates that today, in excess of 85-percent of the revenue earned in the EDA industry can be attributed to the combination of Synopsys, Cadence, and Mentor Graphics.

These three companies, their leadership, sales prowess, and increasing control of the conversation and technical direction in the industry has made for a powerful cartel. But again, that cartel is no more and the crystal ball predicting future dynamics within the EDA industry has gone dark.

So why is Gary Smith vindicated in all of this? Why has Siemen’s acquisition of Mentor Graphics – effectively removing the company from the EDA Triumvirate – proven what Gary Smith started saying a long time ago?

It’s simple: Gary was the first out-spoken advocate pushing for the EDA industry to move up the rungs of the abstraction-level ladder and seize the opportunity to lead the entire electronics market into the realm of system-level design.

He spoke about it, pushed for it, cajoled and criticized when it was slow in happening – and ultimately, took a lot of joshing about his persistence in this area. But in the end, Gary gets the last laugh. He was right.

It turns out, in developing and supporting tools for system-level design and approaching design with a holistic view, the end system is better optimized, more nimble, and more responsive to changes in market conditions.

And it’s more receptive to wide-spread design reuse: The IP industry has exploded in both depth and breadth as a system-level approach has gone mainstream. Similarly, the CAD tool providers are now working to target their tools at specific end-systems in hopes of capturing the wave of a system-level point of view.

[You know, the kind of point of view that caused the EDA Consortium to rename/reinvent itself last year as the Electronic Systems Design Alliance.]

Yes, everybody’s on board now, but for years it was only Mentor attempting to climb up the rungs of abstraction level. And that’s the single most important reason why the company was such an attractive acquisition target for Siemens, an organization which clearly embraces the system-level point of view.

The reason that Mentor is such a good fit for Siemens is because Mentor is a diverse collection – some would say hodge-podge – of different business units servicing a wide set of silos all involved in the design and development of electronic systems. Until recent times, you could not have made that same claim against Synopsys or Cadence.

Look at the quotes included in this week’s press release, praising the acquisition.

Per Tony Hemmelgarn, President and CEO at Siemens PLM Software: “The entire suite of EDA offerings from Mentor are critically important to our vision of growing our customer base and delivering the world’s most comprehensive portfolio of software solutions to build the Digital Enterprise.

“Software tools such as Electrical & Wire Harness Design and Electronic Systems Design, perfectly complement our existing solutions, while tools for IC Design, Verification, Test and Manufacturing expand our offerings and expertise into adjacent segments to bring value to a new set of clients.

“Siemens is now the leading company providing a complete set of integrated software solutions across the entire value chain. We are proud to welcome the outstanding Mentor team and all of their excellent technology into our organization.”

And from Walden C. Rhines, CEO at Mentor Graphics: “Joining the Siemens family presents tremendous opportunity, not only for the Mentor Graphics team, but also for existing, new and future customers.

“Siemens’ desire to leverage all of Mentor’s technologies – from our IC offerings to our systems solutions – was an important part of this transaction. We are proud to become part of an organization with such an excellent reputation and successful track record over the years.”

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Alternative Facets …

But enough with the praise for Mentor’s apparent long-term strategy in crafting a company that’s a good fit for a company as big and bold as Siemens. There are alternative, more poignant impressions to be gleaned from statements from Siemen’s leadership.

Mentor’s sense-of-self now seems mitigated, made vague by its inclusion in this tweet from the CEO of Siemens USA:

So that’s it? Mentor is now just part of a portfolio? How far the proud have fallen. Once part of a cartel, not just a part of a portfolio.

Meanwhile, there is also one very funny thing to come out of this week’s news.

Over the years, no company in EDA has been able to match Mentor’s aggressive campaign to never have a woman on its executive team. At one point, the management team web page showed 18 different individuals who comprised the leadership at Mentor – and not a single woman among them.

Now Mentor’s just part of a portfolio of companies for Siemens USA and, wouldn’t you know it, the whole darn organization’s headed up by a woman: CEO Judith Marks.

Undoubtedly, that’s been a bitter pill for some of the folks in Wilsonville to swallow and condolences are certainly in order. Hopefully, the millions some at Mentor have garnered in the process of being purchased have ameliorated that pain.

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Timing the market …

By the way, I bought 100 shares of Mentor at market on November 14th, the morning the Siemens acquisition was announced, out of a perverse curiosity to watch the process up close. The price I paid per share was exactly what Siemens was offering.

As of today and the close of the deal, Mentor is no longer a public company and is no longer being traded. My shares have been liquidated and I’m $73 richer than I was last November.

Who says you can’t time the market?

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Tags: Cadence, EDA Consortium, ESD Alliance, ESD Alliance Market Statistics Service, Gary Smith, Judith Marks, Mentor Graphics, Siemens, Synopsys, System-level design, Tony Hemmelgarn, Walden C. Rhines

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