Whither EDA?

Introduction:

In his August 16, 2010 issue of EDA WEEKLY, entitled “The State of IP,” the writer complained among other comments, that once a smaller electronics intellectual property (IP) company was acquired by one of the Big 3 EDA vendors (Synopsys, Cadence, Mentor Graphics), the visibility of the acquired company's performance in terms of both revenue and earnings often disappeared from public view. This was true of the acquisition's performance in detail, which one expects to be melded into the acquiring company's totals, but also it was true of the acquisition's overall impact of that niche on the acquiring company.

Examples cited last month included acquired IP companies LogicVision into Mentor Graphics in 2009 and Virage Logic into Synopsys (first announced in June 2010 and completed September 2, 2010). [5]

Also mentioned was the disappearance of financial data from public view of previously-public MCAD/MCAE vendors, either via merging into larger MCAD/MCAE entities or by going temporarily private. As examples:
… leaving a Group-of-Five (G5) MCAD/MCAE vendors for ongoing coverage:

And finally coming to our topic for the current (September 13, 2010) EDA WEEKLY: the classical EDA sector, from whence each of the following EDA entities (save Ansoft) has been absorbed in recent years by Big 3 EDA vendors:
… thereby leaving for continuing coverage the current Group-of-Five (G5) EDA vendors:

With EDA vendor MAGMA Design Automation announcing its financial results in late August for its financial quarter ending August 1, 2010, we now have in place all the G5 EDA vendors' nominal Q2 2010 data to report and discuss.

Contents to follow:

Accordingly, in this issue of EDA WEEKLY, recent News Highlights (including fresh news from the Semiconductor Industry Association) are preceded by the overall revenue & earnings performances of the selected group-of-five EDA players for nominal Q2 2010, followed immediately by G5 vendor by vendor Q2 financial details. When available, these details include original G5 EDA vendor forecasts for nominal Q2 2010, as well as for the nominal third quarter now underway. G5 EDA vendor stock prices are also discussed. Finally, some EDA Consortium (EDAC) statistics are included.


Major Categories in the sequel:

How did the EDA G5 fair during Nominal Q2 2010?

Vendor by Vendor Q2 2010 Details

EDA Big 3 vs. MCAD Top 3 Vendors Q1 & Q2 2010

Recent News Highlights

Final Comment on, “Whither EDA?”


Latest EDA CONSORTIUM REPORT {Q1 2010}


How did the EDA G5 fair during Nominal Q2 2010?

By combing the EDA financial reports for nominal Q2 2010 and gathering similar data from the recent past, we can create Tables 1 and 2 below regarding quarterly revenues and earnings comparisons, respectively [1]. Not only are comparisons possible within any single vendor line, but also the combined group totals provide additional insight. These data will begin the process of assembling an opinion regarding the title question of this issue of EDA WEEKLY for September 13, 2010, namely, “Whither EDA?”

Table 1 reveals that the total nominal Q2 2010 revenue of $800.12 million for the G5 was in fact an increase compared to the $785.55 million of the just prior quarter, but the increase was skimpy at less than +2%. While meager, both Cadence and Mentor delivered improved revenues for Q2 vs. Q1 2010, but Magma was down and Synopsys was flat.

Year over year, Q2 2010's revenue increase vs. Q2 2009 also hardly moved the needle; in this case, while every one else was up slightly, heavyweight Synopsys was down $8.3 million, enough to limit the year over year revenue improvement for the G5 to only $18.45 million, a disappointing 2.36% improvement.

With Q2 2010 's G5 revenue total barely growing sequentially, and moreover barely budging off the revenue level of the recession days of Q2 2009, it's difficult to conclude from the data in Table 1 that happier EDA days have finally arrived. We'll have to examine other information presented in the sequel, before concluding anything about the potential of the EDA industry, a.k.a. “Whither EDA?”


Indeed, the nominal Q2 2010 earnings data in Table 2 below provide some immediate additional concern in pursuing an answer to, “Whither EDA?”

One might get excited to see the G4 total profit of $70.48 million for nominal Q2 2010, a respectable $66.44 million improvement over the earnings in the just prior nominal Q1 2010. However, the excitement soon wanes when one realizes that the bulk of the G4's total improvement in the profit column for Q2 2010 comes from Cadence, whose Q2 2010 earnings of +$48.61 million came mostly from a $67 million acquisition-related tax benefit. Without the tax benefit, Cadence would have again been in the loss column in Q2 2010, and a repeat of Q1 2010's barely black ink for the G5 would have also occurred in Q2 2010.

On the other hand, with Cadence losses under better control this year compared to last year at this juncture, the G4 delivered $123.01 million more in year over year earnings in Q2 2010 than in Q2 2009, and the improvement would still have been some $56 million to the good in Q2 2010 than Q2 2009 even without the Cadence $67 million tax windfall in Q2 2010. “Net net,” a trend toward improved future earnings from Cadence and Mentor deserves some credibility, but from the data in Table 2, one can assert that the G4 is still operating way too close to breakeven to generate much enthusiasm at this juncture. Accordingly, it's still difficult for this observer to predict that happier, more prosperous EDA days will soon arrive. So the answer to, “Whither EDA?”… Still blowin' in the wind. Read on…



Vendor by Vendor Q2 2010 Details




On July 12, 2010 electronics design software company Altium Limited (ASX:ALU) announced an unaudited update on its financial performance for the three months ending June 30, 2010, referred to herein as nominal Q2 2010.

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