Once you're in Schedule B, there is a URL that allows you to return to Schedule A.
First of all, Happy New Year to everyone!
Despite the tragedies of 2010 (Haitian Earthquake, Deepwater Horizon explosion & BP Gulf Oil Spill, ongoing high unemployment, weakening of U.S. national Democratic influence on November 2, and other disturbing events too numerous to mention), around these parts we enter the new year buoyed by “Obama's Comeback” in the last month of 2010: Unemployment compensation! Gay rights! Food safety! Judicial appointments! Arms control! Health care for 9/11 responders!), and of equal importance to our local long-term euphoria: the SAN FRANCISCO GIANTS !!
Back to late 2010 we go
For measuring the financial performances of the key vendors in the world of Electronic Design Automation (EDA) and Electronics Intellectual Property (IP), we must return to late 2010, as the nominal Q3 2010 results for each of the 10 selected vendors emerged between October 21, 2010 (Rambus) and December 2, 2010 (Magma).
Since income tax season is already upon us across the USA, the two-parts of this EDA WEEKLY set (a.k.a. “Poor Russell's Almanack”) are called Schedule A for the EDA portion, and ingeniously-titled Schedule B for the Electronics IP portion soon to follow.
Once both parts (Schedules A & B) of this inaugural 2011 issue of the EDA WEEKLY are posted, we will have fulfilled our promise to continue the unbroken record of covering these market segments since the advent of the quarterly EDA and Electronics IP Commentaries in 2003. With the publication of nominal Q3 2010 results in Schedules A and B, content-continuity with previously-posted EDA and IP financial performance data will have been fully preserved, as follows:
(a) The last stand-alone Electronics IP Industry Commentary for August 2010 covered the G5 IP vendor revenue & earnings results, etc., for Q2 2010.
(b) The last stand-alone EDA Industry Commentary for July 2010 covered the G5 EDA vendor revenue & earnings for nominal Q1 2010.
(c) Subsequently, the G5 EDA vendor revenue & earnings for nominal Q2 2010 were contained in the EDA WEEKLY issue of September 13, 2010, entitled, "Whither EDA?"
All previous EDA & IP Commentaries and EDA WEEKLIES, including those referred to above, are available to readers in the online archives of EDACafe.com.
Each quarter hereafter, the G5 EDA and G5 Electronics IP vendor results will appear in the EDA WEEKLY collection.
By the way, the writer's Quarterly MCAD/MCAE Commentaries are unaffected by this change and will continue to emerge every three months on IBSystems' MCADCafe.com. The latest one appeared on November 28, 2010 and covers the nominal Q3 2010 results of the G5 MCAD vendors:
EDA & IP Vendors in the 2-part EDA WEEKLY postings
In each of the quarterly EDA Industry Commentaries published in EDAcafe.com since May 2003 by Henke Associates, the then-current yearly and quarterly financial performances of a selected group of publicly traded Electronic Design Automation (EDA) companies were analyzed and compared. Expectations regarding the future financial performances of these same EDA entities were documented as well. The originally selected companies were Altium, Ansoft, Cadence, Magma, Mentor Graphics, Nassda, Synopsys, Synplicity and Verisity.
As part of continuing EDA industry consolidation, two previously-selected EDA vendors, namely Verisity and Nassda, were acquired by EDA vendors Cadence and Synopsys, respectively, and hence were dropped from the quarterly EDA Commentaries. More recently, EDA vendor Synplicity was acquired by Synopsys, and EDA vendor Ansoft was acquired by MCAE vendor ANSYS. Consequently, both Synplicity and Ansoft no longer independently appeared in the EDA Industry reports.
Here in Schedule A are featured the nominal Q3 2010 performances of the remaining members of the group of five (G5) EDA vendors:
Electronics IP Vendors to be covered in Schedule B
In each of the previous quarterly issues of the Electronics IP Industry Commentaries, Henke Associates examined the then-recent financial histories and future outlooks of the remarkable phenomenon of Electronics Intellectual Property (IP) providers, a niche that had emerged in its own right by 2003 to claim a substantial amount of revenue in the world of Electronics Design Automation.
Henke Associates had arbitrarily selected eight (8) publicly-traded companies originally (called the "Group-of-8" or "G8"), as representative of the then-current financial state of the Electronics IP industry. At the end of 2004, ARM completed its acquisition of Artisan Components, Inc., thereby reducing the "G8" to "G7". In August 2009 Mentor Graphics completed its acquisition of LogicVision, thereby reducing the “G7” to “G6”. Then on June 10, 2010 Synopsys and Virage Logic announced that Synopsys would acquire Virage Logic. This transaction was completed on September 2, 2010.
When Schedule B is posted (following Schedule A within 10 days), the financial performances of the remaining "G5" public Electronics IP vendors for the third quarter of 2010 will be considered:
Schedule A & Schedule B will then run simultaneously in EDACafe.com until February 7, 2010, when the next issue of the EDA WEEKLY will appear.
Also here in Schedule A, we continue our ONE YEAR LATER feature series by including a brief report from Synopsys, recognizing the original article, “Virage Logic - On the Move,” that first debuted in the EDA WEEKLY of December 22, 2009:
Virage Logic HQ Fremont CA circa 12/2009
Schedule A - The EDA G5 Results for Nominal Q3 2010
We begin our review of the nominal Q3 2010 EDA G5 performances by looking at the summary revenue list (Table 1) below.
The total Q3 2010 revenue for the G5 of $895 million grabs immediate attention. It's higher than the total for any other quarter in the Table, and it not only beats the revenue total of the just prior quarter by 12%, but also eclipses last year's corresponding quarter by over 14%!
This total G5 performance was achieved by huge revenue totals delivered in Q3 2010 by the Big 3. In the case of Synopsys, the Q3 2010 revenue of $375.5 million was “needed” just to allow its current fiscal year to match the total of its revenue in the just prior fiscal year. Indeed, Synopsys revenue would have dropped year over year were it not for the Company's recent activism in acquisitions.
When it comes to earnings in Table 2 below, however, the fun truly begins. We immediately observe the huge G4 total in the Q3 2010 profit column of nearly $165 million in earnings, $95 million more than Q2 2010's sum and a phenomenal $182 million better than the G4 created for Q3 2009.
We quickly spot the anomaly; Cadence's Q3 2010 profit seems unusually large at $126.75 million, and you'd be right. As is revealed in the in the vendor by vendor details below, Cadence reported a giant $143 million tax benefit in Q3 2010. It booked a similar but more modest boost of $67 million in tax benefit in Q2 2010, as did Synopsys (+$92 million) in Q4 2009. The one-off boosts almost obscure the actual nominal Q3 2010 fall off in Synopsys earnings.
Indeed, without the $302 million of G4 tax benefits over the last year, the trailing four quarters' G4 profitability would fall to only $109 million, or a G4 return on sales (ROS) of only 3.3% for that year-long period.
Once again, one might observe that the G4 may still be operating too close to breakeven to generate much market enthusiasm. Nevertheless, a glance at the Q4 2010 portion of the stock market charts for the G4 contained in the sequel, might suggest plenty of “market enthusiasm.” Nevertheless, it's still difficult for this observer to predict that steady long-term prosperity for EDA will soon arrive. So the answer to the same question raised in the September 13, 2010 edition of the EDA WEEKLY, “Whither EDA?,” is still blowin' in the wind.
Additionally, such a loophole as one-off “tax benefits” able to cause earnings distortions of this magnitude resurrects the long standing debate about whether (even GAAP) 'net income' is a preferred way to measure company performance. This topic is further discussed herein, in both the Cadence and the Synopsys “details sections” in the sequel.
G5 EDA Vendor Details for Nominal Q3 2010
On October 19, 2010 Altium LTD (ALU:ASX) reported certain financial results for the three month period ending September 30, 2010 (nominal Q3 2010). According to the October 2010 report, total Altium revenues expressed in $US were ~$9.5 million, a decline of ~17% from the revenue achieved last year in nominal Q3 2009. Using these whole numbers, the revenue in Q3 2009 would have been $9.5 million/0.83 = $11.44 million, whereas our records show $11.2 million as the actual Q3 2009 revenue. For now, we will attribute this discrepancy to the use of rounded management numbers and/or possible currency exchange differences. (To complete Table 1 above, we will use $9.5 million for Q3 2010 and $11.2 million for Q3 2009, until more accurate numbers are forthcoming).
In any case, total revenue is down in Q3 2010 year-over-year. Europe showed a gain of 10% measured in Euros, but the US declined 3%, China declined 30%, APAC outside China declined 18%, and worldwide consulting declined 23%. The US had a large increase in deferred revenue (reason was not reported).
The company's cash balance was said to have increased to US$ 5 million by the end of Q3 2010.
No earnings data were reported.
In commenting on Q3 2010, CEO Nick Martin said, “A favorable Altium performance in Europe was countered by weaker demand in other regions. Our cash position continues to grow stronger due to our careful cost management, despite a stronger Australian dollar and continued uncertainty in global economic conditions.”
Writer's Note: Altium's reports for the spring and fall quarters are brief and unaudited. The better reports covering six months each are issued in summer and winter, at which time any interim discrepancies in numbers are rectified.
Altium self description
Altium Limited (ASX:ALU) creates electronics design software based on the belief that anyone who wants to create electronic products that make a difference should be able to do so. Altium's unified electronics design environment links all aspects of electronics product design in a single application that is priced to be as affordable as possible. This helps electronics designers break down barriers to innovation, harness the latest devices and technologies, manage their projects across broad design 'ecosystems', and create connected, intelligent designs. Founded in 1985, Altium has headquarters in Sydney, and operates worldwide. For more information, visit www.altium.com.
Altium, Altium Designer and LiveDesign, and their respective logos, are trademarks or registered trademarks of Altium Limited, or its subsidiaries. All other registered or unregistered trademarks mentioned in this release are the property of their respective owners, and no trademark rights to the same are claimed.
Chart courtesy of Business Week/Bloomberg (Vertical axis is Australian $)
Altium News Item
On November 4, 2010 the Board of electronics design software company Altium (ASX:ALU) was pleased to announce the completion on November 2, 2010 of its acquisition of Australian cloud application development company Morfik Technology. Altium acquired Morfik in a scrip transaction with Altium issuing 13.3 million fully paid ordinary shares (representing approximately 14.9% of outstanding shares) for 100% of Morfik's outstanding shares.
All members of Morfik's team will join Altium and Altium will acquire all of Morfik's IP and other assets, which are located in Sydney, Hobart, and Kiev, Ukraine. Morfik's CEO, Aram Mirkazemi, will join Altium's executive team as Chief of Engineering. He will work with Altium's founder and CEO/CTO Nick Martin on defining R&D strategy and directing product development.
As announced to the market on September 16, 2010, the acquisition will bolster Altium's engineering team and technological capabilities in the web application domain, and accelerate the development of this platform for Altium's customers. When developed, this will also let electronics designers develop their own ecosystems of intelligent, connected devices, running their own cloud-based applications. These 'device ecosystems' will provide the next generation of experiences for their customers.
More immediately, when combined with the forthcoming Release 10 of Altium Designer, this will provide a framework for the creation of a web-based content delivery model that will in turn allow for a significant improvement in the value added by Altium's subscription services.
Altium will continue Morfik's existing business model, which sells software tools and subscriptions for building web-based applications. Altium believes this is fundamental to the development of the distributed applications that provide the intelligence in future device ecosystems. Historically, Morfik has focused on building cloud applications that serve conventional personal computers (desktop and mobile). This focus will now expand to include the more application-specific devices created by electronics designers that will be part of the next generation of the Internet.
On October 27, 2010 Cadence Design Systems (NASDAQ:CNDS) reported its nominal third quarter 2010 revenue of $237.93 million, up 10.10% compared to revenue of $216.12 million reported for the same period in 2009, and up 4.79% compared to $227.06 million reported in the just prior nominal Q2 2010. Actual Q3 2010 revenue of $237.93 million was above the top of the $225 to $235 million revenue guidance range provided by Cadence 3 months ago
On a GAAP basis, Cadence recognized an amazing net income of $126.75 million, or $0.48 per share on a diluted basis in the nominal third quarter of 2010. Saywhat? Reading just a little further in the Q3 report we find that this auspicious result was solely due to the fact that Cadence's third quarter 2010 net income included a whopping $143.22 million income tax benefit related to the settlement of an Internal Revenue Service examination of Cadence's federal income tax returns for the tax years 2000 through 2002. Without this tax windfall, Cadence would have had to report a Q3 2010 GAAP loss of $16.46 million. The latter is more comparable to the GAAP loss of $14.05 million back in Q3 2009.
Needless to say, that EPS of $0.48 for Q3 2010 was above the EPS guidance 3 months ago of $(0.10) to $(0.08).
The Murky World...
Alas, with the above paragraphs, we enter once more into the murky world where we'd prefer not to go - the world of eternal financial debate over which performance numbers (if any) actually provide a “real” snapshot of the relative performance of business enterprises. Most observers choose GAAP earnings over non-GAAP earnings as a reasonable choice, as there is theoretically more consistency as to what is included. But as we have already seen, even GAAP earnings can contain huge variables like income tax benefits (or penalties) that distort the current GAAP earnings figures, but drop in from a distant past at arbitrary moments.
Once one crosses the border of this murky world of financial debate, there's usually no hope of return to sanity. One is doomed to a never-ending trip into a search that is equivalent to searching for the fountain of youth. It does not exist! Oh sure, you can look at earnings before interest and taxes (EBIT); sometime that helps, but not always. To its credit, Cadence publishes its financials with lots of details for the past five quarters in its quarterly reports, as do others. The numbers are usually found deep into its supplementary report.
When we dare to enter, we see, indeed, over the last five quarters, Cadence has been operating at a “loss from operations,” with the only exception being Q2 2010. However, when the quarterly “interest” and “other expense” figures are tacked on to each of those five operations numbers, all five become “losses”. Then the next line either adds or subtracts the income tax provision, magically transforming three of those five quarters from negative to positive net income numbers.
What's a person to do? One answer is to keep looking for the magic single number which “tells all,” such as comparing the “free cash flow” generated by one company vs. another.
This writer has found over the years, that it's best to hire a really smart, experienced CFO and ask him or her to explain it all to you.
Meanwhile, in these pages, we'll keep using GAAP net earnings, and warn the reader (when possible) of anomalies like tax benefits from the past, etc. Returning now to Cadence's Q3 2010 report…
"Cadence had a successful third quarter. Momentum for Cadence solutions is building at our key customers, driven by the combination of leading and competitive technology and solid performance from the Cadence team. Revenue and operating margin continue to grow. There is still more work to do, but I am pleased with our results to date," said Lip-Bu Tan, president and chief executive officer.
Oops…here we go again; right out of the Cadence Q3 report: “In addition to using GAAP results to evaluate Cadence's business, management believes it is useful to measure results using a non-GAAP measure of net income or net loss, which excludes, as applicable, amortization of intangible assets, stock-based compensation expense, integration and acquisition-related costs, acquisition-related income tax benefits, shareholder litigation costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive severance costs, restructuring charges and credits, amortization of discount on convertible notes, losses on extinguishment of debt, equity in losses or income from investments, write-down of investments, and gains or losses on the sale of investments. Non-GAAP net income or net loss is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company's tax liability.” Got that?
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially:
For the fourth quarter of 2010, the company expects total revenue in the range of $230 million to $240 million. Fourth quarter GAAP net loss per diluted share is expected to be in the range of $(0.06) to $(0.04).
For the full year 2010, the company expects total revenue in the range of $917 million to $927 million. On a GAAP basis, net income per diluted share for fiscal 2010 is expected to be in the range of $0.55 to $0.57.
Cadence self description
Cadence enables global electronic-design innovation and plays an essential role in the creation of today's integrated circuits and electronics. Customers use Cadence® software and hardware, methodologies, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. Cadence is headquartered in San Jose, Calif., with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about Cadence and its products and services is available at www.cadence.com.
Chart courtesy of Yahoo Finance
Cadence News Item
On December 15, 2010 Cadence Design Systems, Inc. (NASDAQ:CDNS) announced that it had won Electronic Design Magazine's Best Electronic Design award for 2010 for the Cadence® Encounter® Digital Implementation (EDI) System 9.1 in the EDA - Design, Verification and Implementation Environment category. This product is highlighted in Electronic Design's December 9, 2010 issue.
"I'm pleased to recognize Cadence's Encounter Digital Implementation (EDI) System 9.1 as one of the best EDA technology offerings in 2010," said David Maliniak, EDA technology editor, Electronic Design. "The tools represent a realization of Cadence's EDA360 vision and the kind of holistic approach to physical design and verification that is demanded at 28 nanometers and below."
Cadence Encounter EDI System is a complete and integrated digital design, implementation, and verification environment for the development of large-scale, complex SoCs, and delivers pervasive design intent, abstraction, and convergence across the flow for a more deterministic path to silicon success. The new and expanded suite of capabilities in EDI System answers the industry call for improved designer productivity in developing advanced low-power and mixed-signal SoCs at leading-edge process nodes -- such as 32 and 28 nanometers -- with hundreds of millions of gates, including hundreds of IP elements and embedded processors.
"The award is an industry benchmark that showcases the best of the year," said David Desharnais, group director, product management at Cadence. "We're excited to receive this award; it is a testament of our commitment to tackling the challenges of end-to-end chip design and improving the time and economics involved with bringing SoCs to market. Electronic Design is a leading industry publication with a consistent pulse on not only the EDA industry, but the entire electronic design community. To be acknowledged by these industry leaders is strong confirmation that we are delivering on our promise and vision of EDA360."
On December 2, 2010 Magma® Design Automation Inc. (NASDAQ:LAVA) reported revenue of $33.93 million for its fiscal 2011 second quarter ended October 31, 2010 (a.k.a. our nominal Q3 2010), up 14.38% from the $29.66 million reported in the nominal Q3 2009 year-ago quarter. Sequentially, nominal Q3 revenue was up a narrow 4.2% compared to $32.56 million in nominal Q2 2010. Magma guidance 3 months ago was for revenue in nominal Q3 to come in between $33.0 and $33.50 million.
"We had another strong performance in the second (fiscal) quarter as, for the seventh consecutive quarter, we exceeded all guidance targets and generated cash," said Rajeev Madhavan, Magma chairman and chief executive officer. "Not only did our analog products continue to take market share, but we added five new customer logos in our core digital implementation segment - momentum that I expect will continue as we deploy Talus 1.2 and Talus Vortex FX, new products we announced today."
Other highlights of Magma's nominal Q3 2010 included an increased presence in the place and route segment to 18 of the world's Top 20 semiconductor companies; the addition of 5 new customers of the FineSim circuit simulation products; and adding three new customers each for the SiliconSmart library characterization product and the products.
In accordance with generally accepted accounting principles (GAAP), Magma reported a net loss of $2.714 million, or $(0.04) per share (basic and diluted), for the quarter, compared to net income of $4.344 million, or $0.09 per share (basic) and $0.08 per share (diluted), for the year-ago quarter, a negative earnings swing year-over-year of $7.058 million, or minus 12 cents a share (diluted). Still, the net loss in nominal Q3 2010 was an improvement of $0.55 million compared the net loss recorded in the just prior quarter. Magma guidance 3 months ago was for nominal Q3 2010 EPS to be $(0.07) to $(0.08).
Finally, on a positive note, in nominal Q3 2010 Magma generated cash flow from operations of approximately $2.7 million.
For Magma's nominal Q4 2010 ending January 30, 2011, the company expects total revenue in the range of $34.0 million to $34.5 million. GAAP net loss per share is expected to be in the range of $(0.04) to $(0.03).
Magma self description
Magma's electronic design automation (EDA) software provides the "Fastest Path to Silicon"(TM) and enables the world's top chip companies to create high-performance integrated circuits (ICs) for cellular telephones, electronic games, WiFi, MP3 players, digital video, networking and other electronic applications. Magma products are used in IC implementation, analog/mixed-signal design, analysis, physical verification, circuit simulation and characterization. The company maintains headquarters in San Jose, Calif., and offices throughout North America, Europe, Japan, Asia and India. Magma's stock trades on NASDAQ under the ticker symbol LAVA. Visit Magma Design Automation on the Web at www.magma-da.com.
Magma is a registered trademark and "Fastest Path to Silicon" is a trademark of Magma Design Automation. All other product and company names are trademarks and registered trademarks of their respective companies.
Chart courtesy of Yahoo Finance
Magma News Item
On December 22, 2010 Magma® Design Automation (NASDAQ:LAVA) announced that Electronic Design Magazine named the Magma Tekton(TM) static timing analysis platform to its list of Hot 100 Products for 2010. Tekton is one of just three products named in the Electronic Design Automation (EDA) category.
Introduced in March of this year, Tekton is uniquely suited for today's most challenging designs and offers higher capacity and faster runtimes than traditional tools, without sacrificing accuracy. It runs multi-scenario analysis efficiently on low-cost hardware without requiring a large number of expensive servers and software licenses. Tekton leverages breakthrough technology to address complex sign-off challenges.
"It gives us great pleasure to have Electronic Design recognize Tekton as a hot product for this year," said Premal Buch, general manager of Magma's Design Implementation Business Unit. "Design teams have responded positively as well and have consistently told us that Tekton runs significantly faster as a timing analyzer on a single CPU and dramatically faster in a multimode, multicorner analysis on a multicore machine."
On November 19, 2010 Mentor Graphics Corporation (NASDAQ: MENT) announced results for its fiscal third quarter ending October 31, 2010. For purposes of consistency, this is nominal Q3 2010 in EDA WEEKLY parlance.
For nominal Q3 2010, the company reported Revenues of $238.937 million, up 26.3 % year-over-year compared to nominal Q3 revenue in 2009 of $189.196 million, and up 27.2% over sequential Q2 2010 revenue. For the last nine months, however, revenues were up only 7.4% to $607.448 million, vs. $565.592 million for the same 9 months last year. (By the way, the company's Q3 2010 revenue guidance 3 months ago was for $220 million).
Net Income for nominal Q3 2010 jumped into the black at $15.256 million compared to a net loss of $27.034 million for nominal Q3 2009, and a net loss of $14.2 million in sequential Q2 2010. Despite the black ink of Q3 2010, for nine months YTD the company remains in red ink to the tune of some $22 million, although it was deeper in $61 million of red ink after nine months last year.
GAAP earnings per share in nominal Q3 2010 were $0.14, vs. a loss of $0.28 per share in Q3 2009, and a loss of $0.13 per share in sequential Q2 2010. (The company's earnings per share guidance for Q3 2010 three months ago was for $0.08 a share).
“The strength of our (2010) third quarter was broad-based with bookings up 60% over the year ago quarter,” said Dr. Walden C. Rhines, CEO and chairman of Mentor Graphics. “Our strategy of focusing on areas of differentiation rewarded us this quarter with strong growth in emulation, printed circuit board design software, design for test, physical verification and a number of our newer system-oriented products like automotive networking. Our diversification also helped drive the business with over 30% of new customers coming from non-traditional segments. We remain confident that our strategy will continue to drive earnings growth for the company.”
During the quarter, the company launched new analysis capability in the FloTHERM® thermal analysis tool, which allows designers to easily find and correct bottlenecks in heat flow in a design. (This capability was featured in the December 13, 2010 EDA WEEKLY ONE YEAR LATER column).
The company's embedded software division released Mentor Embedded ReadyStart™ Platform, a new easy-to-use platform for rapid development of embedded systems, and a version of the Inflexion Platform™ graphical user interface for the Android™ platform. Additionally, the embedded market analyst firm VisionMobile reported that Mentor's Nucleus® real-time operating system is the market leader in handsets with over 2.3 billion copies shipped.
“The third quarter was a record on revenue, bookings and product book-to-bill,” said Gregory K. Hinckley, president of Mentor Graphics. “Despite some headwinds from currency and product mix, we are confident that this momentum will continue into the fourth quarter. As a result, we are raising guidance.”
For the fiscal fourth quarter, the company expects revenue of about $293 million, and GAAP earnings per share of about $0.40. For the full fiscal year 2011 ending January 31, 2011 the company sees revenue in the range of $900 million, and GAAP earnings per share of approximately $0.19.
Mentor Graphics self description
Mentor Graphics Corporation (NASDAQ: MENT) is a world leader in electronic hardware and software design solutions, providing products, consulting services and award-winning support for the world's most successful electronics, semiconductor and systems companies. Established in 1981, the company reported revenues over the last 12 months of about $850 million. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web site: http://www.mentor.com/.
Chart courtesy of Yahoo Finance
Mentor Graphics News Item
On December 23, 2010 Mentor Graphics Corporation (NASDAQ:MENT) announced that the Calibre® InRoute ™, Catapult® C , and FloTHERM ® products were selected for EDN magazine's Hot 100 for 2010. The Hot 100 is EDN's list of "the products and technologies that in 2010 heated up the electronics world and grabbed the attention of our editors and our readers."
Olympus-SoC and Calibre Speed IC Physical Design Closure
The Calibre InRoute platform allows designers to natively invoke Calibre tools within the Olympus-SoC™ place and route system to achieve true manufacturing closure during physical design. The Calibre InRoute product automatically detects and fixes design rule checking (DRC) violations and performs design for manufacturing (DFM) enhancements while optimizing for area, timing, power and signal integrity. The full power of the Olympus-SoC and Calibre platforms together improve design quality, eliminate late-stage surprises, and significantly reduce time to closure.
FloTHERM 9 Addresses Thermal Bottlenecks
Version nine of the FloTHERM 3D CFD (computational fluid dynamics) software for electronics cooling applications includes patent-pending technology, including a bottleneck field that shows areas in a design where a heat path is being congested as it attempts to flow from high junction temperature points to ambient. Design changes to these bottlenecks can help solve the heat flow problem. The Shortcut field highlights areas where the addition of a simple element to the design will provide a new effective heat flow path to ambient temperature. As a result, instead of experimenting with trial and error solutions, engineers can achieve a better solution significantly faster.
This capability was highlighted in the December 13, 2010 EDA WEEKLY feature ONE YEAR LATER.
Mentor Adds SystemC Support to Catapult C
The Catapult C Synthesis tool added SystemC synthesis, expanding the Catapult C tool's full-chip synthesis capabilities. This complements the Catapult C tool's existing untimed ANSI C++ support for algorithmic, control logic, and low-power synthesis capabilities by expanding its full-chip synthesis application scope through the addition of SystemC synthesis for efficient handling of specific SoC needs such as complex bus interfaces, SoC interconnect and TLM2.0-based ESL flows.
EDN.com is a comprehensive information source for the EOEM (electronics original equipment manufacturer) segment, providing in-depth technical information for electronics design engineers and news and strategic business insight for executives.
On December 1, 2010 Synopsys, Inc. (NASDAQ: SNPS) reported results for its fourth FISCAL quarter and fiscal year 2010, both ending Saturday October 30, 2010. Synopsys' fourth fiscal quarter is our nominal Q3 2010.
Speaking shortly after the December 1, 2010 earnings release, Synopsys Senior Account Director Diane Hayward summarized the results as follows: “In short, Synopsys reported a strong end to its fiscal year and is entering fiscal 2011 with an excellent outlook. The company has good technical and customer momentum, and despite the recession, has increased market share, achieved revenue growth, continued with strong R&D investments and delivered new products. It will continue its efforts to explore M&A that broadens its total addressable market and move forward with a financial objective to achieve high-single digit EPS growth.“
For nominal Q3 2010, Synopsys reported revenue of $375.5 million, of $18.5 million above its top-of-the-range guidance number of $357 million, and up 11% compared to $338.3 million year-over-year for nominal Q3 2009. Sequentially, Q3 2010 revenue was 11.4% over nominal Q2 2010 revenue of $336.9 million.
However, revenue for fiscal year 2010 was just $1.380661 billion, an increase of only $20.616 million or 1.5% from $1.360045 billion in fiscal 2009.
“Synopsys had a strong fiscal year, relative to the industry and our expectations, and we enter fiscal 2011 with an even better outlook,” asserted Aart de Geus, chairman and CEO of Synopsys. “Building on significant technology and customer momentum, and an improved customer landscape, we expect to deliver growth in both traditional EDA and the adjacencies in which we've been steadily investing over the past several years.”
Synopsys' revenue guidance for nominal Q3 2010 provided 3 months earlier predicted Q3 revenue of $349 million to $357 million. However, that guidance was conditioned on including “no future acquisition-related expenses that may be incurred. The guidance targets constituted forward-looking information and were based on then-current expectations.”
On a generally accepted accounting principles (GAAP) basis, net income for nominal Q3 2010 dipped to $25.4 million, or $0.17 per share, but it was enough to exceed the $19.5 million, or $0.13 per share, for nominal Q3 2009. Sequentially, however, nominal Q3 2010 earnings of $25.4 million were well below nominal Q2 2010's earnings of $39.33 million and were also below nominal Q1's earnings of $39.55 million.
Synopsys' EPS guidance for nominal Q3 2010 provided 3 months earlier had predicted that nominal Q3 would yield $0.21 - $0.27 net income per share (subject to the same 'condition' as stated above). So the actual $0.17 EPS delivered for nominal Q3 2010 was some four cents below the bottom of the range guidance.
GAAP net income for fiscal year 2010 was significantly improved at $237.1 million, or $1.56 per share, compared to $167.7 million, or $1.15 per share for fiscal 2009. Lest we forget, however, net income for fiscal year 2010 includes a one-time $94.3 million, or $0.62 per share, tax benefit associated with the IRS settlement for fiscal years 2002-2004, announced on January 12, 2010. Without this one-time tax benefit, Synopsys' net income for fiscal 2010 may well have been $142.8 million, or only 85.2% of the fiscal 2009 net income.
SNPS (Synopsys stock) suffered a price decrease of 2.5% on December 2, 2010, the day after the nominal Q3 2010 results were announced. But the stock quickly recovered within 6 days and went on to achieve a closing price of $27.23 by December 23, 2010, the highest level the stock has been since closing at $26.35 way back on May 27, 2008. (However, the stock today is nowhere close to its most recent high of $35.29 reached on January 2, 2004, nor its all time high of $36.19 achieved on November 1, 1999.
Chart courtesy of Yahoo Finance
Certainly the cost to Synopsys of acquisitions during fiscal 2010 could easily lower fiscal 2010 earnings vs. those of fiscal 2009, but the revenue added by those acquisitions would surely have delivered an incremental benefit to the Synopsys revenue line for fiscal 2010.
Consider just the effect of one acquisition on revenue, for example. Virage Logic recognized revenue of $25.24 million in Q1 2010, the last quarter for which it published its stand-alone revenue prior to its acquisition by Synopsys consummated on September 2, 2010. Even assuming no improvement in revenue enjoyed by the integrated Virage Logic team, without the added Virage Logic revenue for the September and October 2010, Synopsys' total revenue for the fiscal year 2010 may have shown no growth or even a revenue decrease compared to fiscal 2009.
Synopsys did a decent job in cash flow management in fiscal 2010. Despite using some $500,829,000 net cash in connection with acquisitions during the year, Synopsys still managed to improve its fiscal year end cash hoard to $775,497,000 or $73,794,000 more cash that it had when it began the year.
Speaking of Cash Flow...
This is likely as good a place as any, to return to the earlier discussion about whether 'net income' is the best measure of a company's performance, first mentioned above in the text between Tables 1 and 2, and mentioned again in the section on Cadence (see The Murky World... above). As press time approached for this Schedule A edition of the EDA WEEKLY, the writer came across an article by Seth Jayson in the Motley Fool published on December 23, 2010. Here's how his article began:
“Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measurement of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls. Earnings' unreliability is one of the reasons investors often flip straight past the income statement to check the cash-flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company or merely disguised a cash gusher with a pretty headline.”
Moreover, the examples of using 'free cash flow' instead of net income that Mr. Jayson chose? Four of our G5 EDA vendors! This chart from his article is relevant:
“Over the past 12 months, Synopsys generated $301.8 million cash on net income of $237.1 million. That means it turned 21.9% of its revenue into FCF. That sounds pretty impressive. Still, it always pays to compare that figure with those of sector and industry peers and competitors, to see how your company stacks up.
But just when one is getting enthusiastic about 'free cash flow' as a measure, the author warns:
“Unfortunately, the cash-flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash comes from high-quality sources. They need to be real and replicable in the upcoming quarters, rather than offset by continual cash outflows that don't appear on the income statement, such as major capital expenditures. For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses, like depreciation, is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; it's good to see, but it's ordinary in recessionary times, and you can increase collections only so much”.
Gee, it appears that the question is still open. Nevertheless, the relative ranking of the four vendors above is similar, whether “net income' or 'free cash flow' is the criterion.
The Vendor Supplemental Reports on Revenue Distribution
In the EDA WEEKLY of September 13, 2010, entitled “Whither EDA?,” the writer discussed in Footnote  the appearance of supplementary reports from several G5 vendors on revenue distribution:
The writer argued that the Synopsys list provided some useful data, reproduced here in green font:
Comment #2: Among the four segments into which Synopsys has chosen to split its total revenue for supplementary reporting purposes, the revenue from the "IP & Systems" segment has reached and eclipsed the "Manufacturing" segment in total revenue for the first three quarters of FY 2010, to become the second highest revenue producer next to the traditional leader -- the Synopsys "Core EDA" segment:
Table 6B Synopsys Four Product Segments (cumulative FY 2010 revenue in $ millions)
Comment #3: Revenue recognition in FY 2010 Q4 from recent IP acquisitions, such as Virage Logic, is likely to increase the full 2010 fiscal year revenue number percentage for "IP & Systems" faster than it increases total Synopsys revenue, which may mean an even higher YE percentage of "IP & Systems" revenue as a percent of total Synopsys revenue than 13.30% for the full FY 2010.
Indeed, the September 13th prediction in Comment #3 by the writer came to pass in the final quarter of Synopsys fiscal year (a.k.a. nominal Q3 2010), when the 'IP & Systems' category vaulted to 17.66% of revenue in the quarter, lifting the category to 14.48% for the fiscal year, as Synopsys' data shows:
Synopsys' Nominal Q4 2010 & Fiscal 2011 Financial Targets
Synopsys also provided its financial targets for nominal Q4 2010 and for its next full fiscal year (2011). These targets do not include future acquisition-related expenses that may be incurred in fiscal 2011. These targets constitute forward-looking information and are based on current expectations.
Nominal Q4 2010 Targets:
Revenue: $360 million - $368 million
GAAP expenses: $305 million - $323 million
Other income and expense: $0 - $2 million
Fully diluted outstanding shares: 149 million - 154 million
GAAP earnings per share: $0.21 - $0.28
Revenue from backlog: greater than 90%
Full Fiscal Year 2011 (November 2010 through October 2011) Targets:
Revenue: $1.500 billion to $1.525 billion
Other income and expense: $2 to $6 million
Fully diluted outstanding shares: 149 million to 154 million
GAAP earnings per share: $1.06 to $1.24
Cash flow from operations: approximately $220 to $240 million
Revenue from backlog: greater than 80%
Synopsys, Inc. (NASDAQ:SNPS) is a world leader in electronic design automation (EDA), supplying the global electronics market with the software, intellectual property (IP) and services used in semiconductor design, verification and manufacturing. Synopsys' comprehensive, integrated portfolio of implementation, verification, IP, manufacturing and field-programmable gate array (FPGA) solutions helps address the key challenges designers and manufacturers face today, such as power and yield management, system-to-silicon verification and time-to-results. These technology-leading solutions help give Synopsys customers a competitive edge in bringing the best products to market quickly while reducing costs and schedule risk. Synopsys is headquartered in Mountain View, California, and has approximately 70 offices located throughout North America, Europe, Japan, Asia and India. Visit Synopsys online at http://www.synopsys.com.
Chart courtesy of Yahoo Finance
Other Tables of Interest
Starting with his initial EDA WEEKLY posting on November 09, 2009, the first year's series of EDA WEEKLY articles by this writer continued on December 07, 2009, with the publication entitled, “MAD Progress.”
The “MAD Progress” article was the subject of a ONE YEAR LATER update by Mentor Graphics Corporation last month, in the December 13, 2010 EDA WEEKLY posting.
In the current January 10, 2011 EDA WEEKLY, we welcome a ONE YEAR LATER contribution from Synopsys, Inc., the new owners of Virage Logic. The former IP vendor was profiled in “Virage Logic - On the Move,” first posted on December 22, 2009. It was the third of thirteen debut-year EDA WEEKLY articles by the writer through October 2010, the thirteen issues a result of the schedule of publishing every four weeks:
Virage Logic Finds a New Home within Synopsys
It seems like only yesterday that Dr. Russ Henke profiled Virage Logic in his EDA WEEKLY article that first appeared on December 22, 2009. The Electronics Intellectual Property (IP) landscape has changed quite a bit since then, as EDA players emphasize how tools, services and IP are each integral to helping electronics designers lower their costs and integration risks while speeding time-to-market.
One dramatic example of this change in the IP landscape was Synopsys' acquisition of Virage Logic. Virage Logic's embedded SRAMs, non-volatile memory, logic libraries, configurable processor cores, embedded test and repair IP and audio post-processing software were natural complements to Synopsys' DesignWare® interface and analog IP portfolio. The Virage Logic acquisition emphasized Synopsys' commitment to growing its IP portfolio, increasing its engineering staff and expertise, and enabling it to continue developing products to meet designers' evolving requirements.
For nearly a decade, Synopsys' DesignWare IP business has grown both organically and through acquisitions, the latter including Cascade (PCI Express® IP); Mosaid (DDR IP); MIPS' Analog Business Group, formerly Chipidea (data converters, audio codecs and video front-ends); and Virage Logic. With its latest acquisition, Synopsys became the second largest IP vendor (Gartner, March 2010) with over 1300 engineers worldwide, 800 of which are analog/mixed-signal engineers.
Figure 1 below shows a Synopsys timeline of key acquisitions and product introductions in the last five years:
Figure 1: Synopsys Grows its IP Business
Full Steam Ahead
Two months after the acquisition closed in September 2010, the former Virage Logic team moved into Synopsys' headquarters in Mountain View, California (as well as to various other locations around the world). It is now a part of the Synopsys Solutions Group, which is headed by Mr. Joachim Kunkel, the senior vice president and general manager. Synopsys holds the same fundamental beliefs that Virage Logic had, “Whatever it takes to be a trusted IP partner.” This includes being the technology leader by having the most advanced products available, delivering high-quality products that meet customers' project schedules, and becoming an integral part of SoC design ecosystems.
With these elements as its backdrop, Synopsys has made significant progress since the Virage Logic acquisition, including announcing several new 28-nm memory compilers, and releasing the first dual core ARC processor optimized for high-definition audio players (AS 221 BD). In addition, Synopsys introduced the DesignWare Sonic Focus® Stereo and Sonic Focus Stereo HD solutions, which are audio-post processing software IP products that enable SoC designers and OEMs to significantly enhance audio quality in low-power DSP applications and tethered consumer electronic devices.
Overall, Synopsys has introduced several new DesignWare IP products, such as a comprehensive MIPI IP portfolio consisting of CSI-2, D-PHY, DigRF v3 and DigRF 4, DSI and M-PHY protocols, HDMI 1.4 TX and RX solutions, the DDR multiPHY, which supports six standards in a single PHY and its complementary Universal DDR Controllers.
Synopsys was also awarded TSMC's “Interface IP Partner of Year”, which is a testament to Synopsys' investment in customer support and delivering over 150 high-quality IP products supporting the TSMC processes (see Figure 2).
These are just a few examples of how Synopsys continues to innovate with new products and technology that help designers incorporate key functionality into their designs and deliver compelling products to the market.
Figure 2: John Koeter, vice president of marketing for the Solutions Group at Synopsys,
accepts TSMC's “Interface IP Partner of the Year” award on behalf of Synopsys,
at TSMC's OIP Partner Forum on October 5, 2010.
In addition to the acquisition of Virage Logic and the expansion of its DesignWare IP portfolio, Synopsys has invested heavily in growing its systems business with the acquisitions of VaST, CoWare, and Synfora this past year. With the combination of IP and System level solutions, Synopsys is well positioned to provide the design community with the necessary elements that help designers accelerate their hardware (HW) and software (SW) throughout the IP, semiconductor and system design chain.
Designers can find all of the following elements from a single trusted IP provider - Synopsys:
- High quality, most commonly-used semiconductor IP solutions
- Tools and models to develop and reuse differentiated functional blocks at the system level
- Tools and models to develop the best SoC architecture
- Virtual and FPGA-based prototyping solutions to accelerate software development, HW/SW integration, and system validation
Many thanks to Synopsys' Meaghan Le & Heather Webb for the above vignette to celebrate the EDA WEEKLY ONE YEAR LATER program.
Among the ten additional EDA WEEKLY postings during that first year, six featured five more EDA-related companies, two of the five subsequently-covered companies which are privately-held and three publicly-traded.
The remaining four of the ten additional freshman year postings were editorial commentaries on the economy & semiconductors, the economy and the EDA Industry, the State of IP (Intellectual Property), and “Whither EDA?”
The Sophomore Year
The second year of EDA WEEKLY articles by this writer began on November 15. 2010 with “Lynguent Part I,” followed on December 13, 2010 by “Lynguent Part II.” The third is of course, “The EDA & Electronics IP Almanac: Q3 2010 - Schedule A,” the article you are currently reading.
ONE YEAR LATER (November 2010)
In observance of the one-year anniversary (November 09, 2010) of the appearance of the writer's first EDA WEEKLY article, “The Role of Business Planning,” the special promotion that would have ended December 01, 2010 to obtain a reduced-price special copy of the entire Planning Tool Kit (PTK) was extended to May 01, 2011.
To obtain details on the extended "2010 - 2011 Business Planning Tool Kit Promotion" from HENKE ASSOCIATES, please click on the URL below and scroll to the last entry on that page:
About the Writer:
Since 1996, Dr. Russ Henke has been and remains active as president of HENKE ASSOCIATES, a San Francisco Bay Area high-tech business & management consulting firm. The number of client companies for Henke Associates now numbers more than forty. During his corporate career, Henke operated sequentially on "both sides" of MCAE/MCAD and EDA, as a user and as a vendor. He's a veteran corporate executive from Cincinnati Milacron, SDRC, Schlumberger Applicon, Gould Electronics, ATP, and Mentor Graphics. Henke is a Fellow of the Society of Manufacturing Engineers (SME) and served on the SME International Board of Directors. Henke was also a board member of SDRC, PDA, ATP, and the MacNeal Schwendler Corporation, and he currently serves on the board of Stottler Henke Associates, Inc. Henke is also a member of the IEEE and a Life Fellow of ASME International. In April 2006, Dr. Henke received the 2006 Lifetime Achievement Award from the CAD Society, presented by CAD Society president Jeff Rowe at COFES2006 in Scottsdale, AZ. In February 2007, Henke became affiliated with Cyon Research's select group of experts on business and technology issues as a Senior Analyst. This Cyon Research connection aids and supplements Henke's ongoing, independent consulting practice (HENKE ASSOCIATES). Dr. Henke is also a contributing editor of the EDACafé EDA WEEKLY, and he has published EDA WEEKLY articles every four weeks since November 2009; URL's available.
PS Please watch for the posting of the following supplement between January 10 and January 20, 2011:
The EDA and the Electronics IP Almanac:
Q3 2010 - Schedule B