The EDA and MCAD/MCAE Almanac -Nominal Q3 2011

On December 1, 2011 MAGMA® Design Automation Inc. (NASDAQ:LAVA), a provider of chip design software, finally reported revenue of $38.28 million for its fiscal 2012 second quarter ended October 30, 2011, up 12.82% from the $33.93 million reported YOY in the corresponding 2010  quarter. MAGMA’s fiscal second quarter 2012 corresponds to the EDA WEEKLY’s nominal Q3 2011. As guidance three months ago, the company expected total nominal Q3 2011 revenue in the range of $37.5 million to $38.0 million. MAGMA booked $35.31 million in nominal Q2 2011.

The word finally used here carries at least two meanings; (1) MAGMA  was the last of the EDA G5 to report its nominal Q3 2011 financials, and (2) depending on the speed of absorption, MAGMA as an entity will soon cease to exist on its own, as its people, products and financial numbers are swallowed up in the Synopsys acquisition.

"During the last quarter, MAGMA made great business and technical progress—adding a record number of new logos and generating positive cash flow for the 11th consecutive quarter," said Rajeev Madhavan, MAGMA chairman and chief executive.

Rajeev Madhavan

"Our product portfolio is the strongest it's ever been, and as a result, the customer adoption rate is accelerating. The momentum of the Titan™ analog implementation and optimization system continues to grow with more than 30 customers now deploying it in their design flows. Our core Talus® implementation platform added 4 new logos and 8 existing customers extended their contracts. Our sign-off tools gained traction this quarter with Tekton™ now in use by more than 25 customers and QCP™ adding 10 new logos. The FineSim™ circuit simulator added 9 new logos,” Madhavan added.

Additional information about product enhancements and customer adoption is available in MAGMA's Second Quarter (nominal Q3 2011) Product Update on the MAGMA website at

Also on November 30, 2011, MAGMA simultaneously announced that the company had entered into a definitive agreement to be acquired by Synopsys (NASDAQ:SNPS), an icon and acknowledged leader in software and IP used in the design, verification and manufacture of electronic components and systems. The combination of the two companies' technologies, development capabilities, support teams and sales channels should provide chip designers with greater access to state-of-the art electronic design automation (EDA) solutions that enable more profitable silicon.

MAGMA Conference Call Canceled

Due to the acquisition announcement MAGMA did not hold a conference call to discuss fiscal second quarter results.

MAGMA GAAP Nominal Q3 2011 Net Income Results

In accordance with generally accepted accounting principles (GAAP), MAGMA reported net income of $3.0 million, or $0.04 per share (basic and diluted) for the second quarter (nominal Q3 2011), compared to a net loss of $(2.7) million, or $(0.04) per share (basic and diluted), for the year-ago second quarter.

In the second quarter (nominal Q3 2011), MAGMA generated cash flow from operations of approximately $2.4 million.

MAGMA Business Outlook

Due to the pendency of the acquisition of MAGMA by Synopsys announced on November 30, 2011, MAGMA is withdrawing all prior financial guidance and will no longer provide any new financial guidance.

Presentation and Disclosure of Revenue

For the second quarter of fiscal 2012 (a.k.a. nominal Q3 2011) revenue and cost of revenue is reported in MAGMA's Condensed Consolidated Statement of Operations in two categories: Licenses and Services. Previously, revenue and cost of revenue was reported in three categories: Licenses, Bundled licenses and services, and Services. MAGMA management has concluded that the results of the Bundled Licenses and Services category of revenue do not indicate a material trend in the historical or future performance of its operations. Bundled licenses and services revenue and cost of revenue are divided into their component parts and included with either Licenses or Services. Presentation of prior period revenue and cost of revenue has been adjusted to conform to the current period.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements in quotations from MAGMA's management. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from MAGMA's current expectations. Factors that could cause or contribute to such differences include, but are not limited to: delays in or failure to satisfy required conditions to the closing of the proposed merger, including the receipt of required regulatory approvals with respect to the transaction and approval of the acquisition by MAGMA's stockholders; failure to consummate or delay in consummating the transaction for other reasons; the possibility that the expected benefits of the transaction may not materialize as expected; disruption from the transaction making it more difficult to maintain relationships with customers and employees; our reliance on a small number of customers for a significant portion of our revenue, which could cause our revenue to decline if these customers delay orders or fail to renew licenses or if we are unable to maintain or develop relationships with current or potential customers; the effect of restrictive covenants in our debt arrangements which could limit our ability to operate our business; the substantial amount of MAGMA's indebtedness, which could adversely affect our financial position; our ability to generate sufficient operating cash flow or alternatively obtain external financing; customer payment defaults that may cause us to be unable to recognize revenue from backlog, and changes in the type of orders comprising backlog that could affect the proportion of revenue recognized from backlog each quarter, which could have a material adverse effect on our financial condition and results of operations; actions by our competitors that hold a large share of the electronic design automation (EDA) market and  increasing competition among EDA vendors as customers tightly control their EDA spending and use fewer vendors to meet their needs; weaker-than-anticipated sales of MAGMA's products and services; weakness in the semiconductor or electronic systems industries; a potential failure of customers to adopt, or to adopt at a sufficiently fast rate, 28-nanometer and smaller design geometries on a large scale; MAGMA's ability to integrate acquired businesses and technologies and keep pace with evolving technology standards; the possibility of litigation (including related to the proposed merger) and potentially higher-than-anticipated costs of litigation related to patent infringement and other intellectual property claims; potentially higher-than-anticipated costs of compliance with regulatory requirements, including those relating to internal control over financial reporting; the ability to manage expanding operations; the ability to attract and retain the key management and technical personnel needed to operate MAGMA successfully; the ability to continue to deliver competitive products to customers; and changes in accounting rules. Further discussion of these and other potential risk factors may be found in MAGMA's public filings with the Securities and Exchange Commission (, including its Form 10-Q for the fiscal quarter ended July 31, 2011. MAGMA undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

Additional Information and Where to Find It

In connection with the proposed merger, MAGMA will file a proxy statement and other relevant documents concerning the transaction with the Securities and Exchange Commission ("SEC"). The definitive proxy statement will be mailed to stockholders of MAGMA. Investors and stockholders of MAGMA are urged to read the definitive proxy statement and other relevant documents when they become available because they will contain important information about the transaction. Copies of these documents (when they become available) may be obtained free of charge by making a request to MAGMA's Investor Relations Department either in writing to MAGMA Design Automation, Inc., 1650 Technology Drive, San Jose, California 95110 or by telephone to (408) 565-7799. In addition, documents filed with the SEC by MAGMA may be obtained free of charge at the SEC's website at or by clicking on "SEC Filings" in the "Investors" section of MAGMA's website at .

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