Whither EDA?

For the nominal first & second quarters of 2010, the following two charts apply:

The Top 3 MCAD vendors clearly maintain their dominant position from a revenue perspective, and lead the profitability parade as well. But as the Cadence tax credit showed in Q2, it doesn't take much for the EDA folks to quickly improve their record of iffy ROS.

Recent News Highlights

Corresponding with the recent success in stemming the flow of gushing oil into the Gulf of Mexico from the Deepwater Horizon disaster in April, the general pall from that debacle seems to be lifting from the US psyche, offering new hope that the economic recovery underway prior to April 2010 can now be resumed.

In the NASDAQ Composite chart in the foregoing, we already have seen the lift in the NASDAQ in recent days. And by the end of the day September 3, the Standard & Poor's 500-stock index was also up 1.32%, continuing a market rally that began in the middle of the week of August 29, 2010.

Moreover, the US jobs data have turned somewhat more optimistic. The Bureau of Labor Statistics reported on September 3, that private US employers hired more workers over the past three months than first estimated, including 67,000 new jobs in August. In addition, the Labor Department revised upward its private sector number for July, raising the number of jobs added to 107,000, from the 71,000 originally reported. And private sector hiring in June, originally reported at 83,000 and lowered to 31,000, was raised again to 61,000.

The graph above clearly shows the progress once President Obama took office on January 20, 2009, in reversing the monthly string of crushing US private sector job losses resulting from the deregulated Wall Street meltdown during 43's second recession. The momentum of improvement was slowed in Q2 2010, but it's now beginning to recover here during calendar Q3 2010.

Of course, the minority party these days wants us to blame the current president for not creating 250,000 new jobs every month now; further, the minority party would have us think that the fundamental seeds of the recent recession and job losses were sown since the Obama Administration took over, when in fact every single one of today’s economic problems was caused by the reckless policies of the Executive Branch between 2001 and the end of 2008…every single one!

Meanwhile, President Obama soldiers on. Rather than hand-wringing, his administration is proactively moving forward with new proposals to create more jobs and simultaneously begin to address a chronic problem in the United States – fixing our deteriorating infrastructure. Claudia Assis of MarketWatch reported late Monday September 6, 2010 on the President’s Labor Day speech in Milwaukee, in which he unveiled a $50 billion plan to upgrade the nation's roads, airports and railways. The public-works plan is part of a larger effort to provide more jobs and help the US economic recovery. That larger plan announced September 8 in Cleveland, will build upon projects and investments already underway through the Recovery Act. The plan calls for rebuilding 150,000 miles of roads, building or maintaining 4,000 miles of railways, and constructing or refurbishing some 150 miles of airport runways along with a new air navigation system to cut travel times and airport delays.

Of course, this writer has commented frequently in this space and elsewhere, about the colossal decades-long neglect of the nation's infrastructure, but exacerbated by deep federal budget cuts during 2001 - 2008. We the people receive periodic reminders of this neglect when deadly catastrophes occur, such as the Interstate Highway I-35 Bridge Collapse in Minneapolis in 2008.

We received another urgent call just last week here in the San Francisco Bay Area, when 38 homes and at least five lives were destroyed in a massive natural gas line explosion and fire in San Bruno, CA on September 9, 2010:

This country needs another WPA program to restore the country's infrastructure and simultaneously put millions of US people back to work. But can you imagine the outcry from the minority party today, if President Obama were to float the idea of such an effective, massive program first implemented by Franklin D. Roosevelt?

Commenting on the September 3 jobs report, Obama said the fresh data shows the economy is moving in the right direction. But he said further action is needed to help bring back the 8.4 million jobs lost since the recession began in December 2007.

"It reflects the steps we've already taken to break the back of this recession. But it's not nearly good enough," Obama said. He called on the Congress, which has been stymied by minority party "do nothing” opposition and Tea Party antics, to keep taxes low for the middle class, repeal the Bush administration's tax cuts for the richest 2% of Americans, and to pass a bill that would increase lending and reduce taxes for small businesses.

Scott Brown, an economist at Raymond James, said he sees no sign of the country slipping back into recession. "You're still seeing broad-based job gains. It's not strong, but it's positive," Brown said.

On August 30, 2010 the Semiconductor Industry Association (SIA) reported that global sales of semiconductors grew to $25.2 billion in July 2010, an increase of 1.2% from June when sales were $24.9 billion and an increase of 37.0% from July 2009 when sales were only $18.4 billion. Year to date sales total $169.2 billion, an increase of 46.7% from the $115.3 billion reported for the first seven months of 2009. All monthly sales numbers represent a three-month moving average.

“Worldwide sales of semiconductors were strong in July despite growing indications of slower growth in the overall economy,” said SIA President Brian Toohey. “The continued proliferation of semiconductors into a broad range of products provides opportunities for industry expansion even in a period of slower overall economic growth. Although recent public statements from a number of major manufacturers have emphasized limited visibility for the near-term, we continue to expect that industry growth for 2010 will be in line with our mid-year forecast of 28.4%,” Toohey concluded.

SIA self description:

The SIA is the voice of the US semiconductor industry, America's number-one export industry over the past five years. SIA seeks to continue US leadership in this critical sector that employs 185,000 people in the US and provides the enabling technology for America's $1.1 trillion high-tech industries with a US workforce of nearly 6 million people. More information about the SIA can be found at www.sia-online.org.

EDA WEEKLY writer's comment:

The optimism of G5 executives as well as Mr. Toohey's comments above would suggest that the near term future of EDA financial performances should avoid a downturn through at least the end of calendar 2010, which helps in part to answer the title question in the near term, “Whither EDA?”

On September 1, 2010 Gartner, Inc. released its latest outlook on the semiconductor industry. Worldwide semiconductor revenue in 2010 is forecast to reach $300 billion, a 31.5% increase from 2009 revenue of $228 billion, according to the latest outlook by Gartner, Inc. Analysts project worldwide semiconductor revenue to total $314 billion in 2011, a 4.6% increase from 2010.

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