Ah, June 21, 2010. Summer started today at 4:28 AM PDT, just as this latest issue of EDA WEEKLY was first posted on EDACafe.com. In the United States, we are now closer to the upcoming Fourth of July celebration (13 more days) than the recent Memorial Day weekend (21 days ago). The birthday anniversary of our nation always engenders more optimism than the solemn duty of honoring those who have been lost.
Lest the title of this EDA WEEKLY be misunderstood from the get-go, it refers to both the recovery of the US economic situation along with the recovery of the EDA Industry: (1) both recoveries have been underway since early 2009; (2) both recoveries have been rudely and temporarily interrupted by very recent events; and (3) both recoveries need to be rapidly resumed once more. Thus the title refers to the ongoing WORK that has been leading to PROGRESS in both recoveries, and any glitches must now be righted to make still more PROGRESS going forward.
This issue of EDA WEEKLY will deal first with the interruption of the economic recovery. Then we will recount and analyze the current financials recently announced by each of the G5 EDA vendors.
Who or what is the “G5”? The current EDA “G5” or “Group of 5” consists of worldwide EDA Industry vendors Altium, Cadence, Magma, Mentor Graphics and Synopsys. These five publicly-held independent EDA vendors remain among a group of nine such vendors originally selected in 2003 by Henke Associates for quarterly coverage in EDA COMMENTARIES on IBSystems' EDACafe.com. (Since then, Ansoft, Nassda, Synplicity and Verisity have been acquired by ANSYS, Synopsys, Synopsys, and Cadence, respectively).
The sequel is divided into the following parts:
Part I. The Economic Environment: Progress Interruptus
Part II. Recent EDA-related News Highlights
Part III. The Now: How did the G5 EDA Vendors fair during the nominal First Quarter of 2010?
Part IV. Company by Company Q1 2010 details
Part V. EDA Vendor Q1 2010 Stock Performances
Part VI. Post-Q1 2010 Stock Prices
In overcoming the ravages of the “Great Recession” (that officially started in December 2007), real progress became evident in Q3 2009, when the US GDP first turned positive after four quarters of negative growth. The middle of 2009 was also the time that monthly US job losses began to retreat steadily, actually turning to adding jobs in November 2009:
The positive economic news extended into the first three or so months of 2010.
Indeed, the overall US economy was improving steadily, with continued positive GDP increases, a positive slope to the New York stock markets through Q1 2010 and slightly beyond, along with the improvements in US non-farm payrolls each month, increasing worldwide semiconductor sales, increasing numbers of VC startup investments across the US, etc.
But then … well, readers may recall the lyrical refrain from Joni Mitchell's hit song, “Big Yellow Taxi”:
Many of the positive economic signals changed during the third week of April - a real case of “Progress Interruptus”.
Before those changes to the EDA-related economy are enumerated, let's first discuss how the sequence of economic conditions gets communicated in the writer's EDACafe.com articles.
In virtually every one of the four-score-and-nine quarterly COMMENTARIES published by Henke Associates since May 2003, whether they focused on MCAD/MCAE vendors, Electronics Intellectual Property (IP) vendors, or standard EDA Industry vendors, the then-current general economic climate of the times in which the vendors operated was described.
In 2010 alone, there have been fully six (6) such opportunities so far to comment on the then-current economic conditions:
- Electronics IP Industry Update - February 2010
- MCAD Industry View - A March 2010 Update
- EDA Industry Update - March 2010
- MCAD/MCAE Industry View - A May 2010 Update
- Electronics IP Industry Update - June 2010
In the first three articles enumerated above, the US economy was indeed described as improving steadily, with positive GDP increases, a positive slope to the New York stock markets through Q1 2010 and beyond, improvements in US non-farm payrolls each month, increasing worldwide semiconductor sales, increasing numbers of VC startup investments, etc.
However, the last three articles listed in the foregoing began to mention the nascent signs of a changing economic environment. Number 4 described reductions in revenue and profit of the combined MCAD/MCAE G5 during Q1 2010 vs. sequential Q4 2009, but that reduction was dismissed as due to the traditional seasonal strength of Q4. Besides, each month more and more US jobs were being added during Q1, and MCAD/MCAE G5 Market Caps were mostly steady from January 1, 2010 till part-way into Q2.
Nevertheless, (1) the NASDAQ Composite Index had definitely taken on a downward slant in late April, (2) the peculiar and unexplained V-shaped stock market glitch had occurred on May 6, and (3) the then-downward slope of the NASDAQ (green line) was again mentioned in the ANSYS (blue line) section of article Number 4 (see chart below):
More negative economic signs:
By the time articles Numbers 5 and 6 above were posted, a couple of negative economic signs were plain to see and were duly reported in those articles. But the reader could be excused if s/he missed these reports (in the Footnotes), since every other economic data point mentioned for April 2010 was still positive.
On the negative side, the Footnotes did contain mention again of the V-shaped glitch with this graphic from May 6, 2010:
The resumption of the generally negative slope of the NASDAQ was also mentioned along with the decline of the euro vs. the dollar, but during that same May 8-9 weekend the Europeans announced their bailout package, and everything turned rosy for a few days.
However, article Number 6 ended by listing several caveats in Footnote 3 about negative impact of the euro's continuing decline and worsening Eurodebt:
Still, there was no mention in cited articles 1 through 6 listed above, of the Deepwater Horizon explosion in the Gulf of Mexico on April 20, 2010 and the repeated British Petroleum (BP) failures to stem the massive oil spill over the next month and beyond.
That's because coverage of that tragedy in articles 1 through 6 was totally unnecessary, as there were and are massive reports 24/7 from every possible media outlet across the USA and the world. But just to remind the reader what the Deepwater Horizon disaster was/is all about, we present the following:
“Taking 11 lives among the 126 crew members, the British Petroleum (BP) Deepwater Horizon offshore oil drilling platform in the Gulf of Mexico exploded on April 20, 2010.
More than three frustrating weeks after the explosion, millions of barrels of oil were still gushing into the Gulf's seawater 5000 feet below the surface:
Even the somewhat-rusty mechanical/electronics engineering skills buried deep within this writer's background were appalled when the history of dubious design, poor maintenance, and cavalier attitude emerged about the single emergency blowout prevention device that BP had relied upon. Once this one device failed, what followed was inevitable.
Already deemed the worst man-made environmental disaster in history, the Gulf of Mexico BP Deepwater Horizon oil spill was 41 days old by Memorial Day May 31, and still gushing thousands of barrels of oil into the Gulf. The much-heralded BP attempt to cap the well over the Memorial Day weekend had failed with its “top kill” approach, which tried to shoot mud and pieces of rubber into the well but couldn't beat back the pressure of the gushing oil. On June 1, BP said flatly for the first time that it had abandoned any further plans to try to plug the well, and would instead try to siphon the leaking oil and gas to the surface until relief wells can stop the flow, most likely not before August! By June 7, BP had finally succeeded in siphoning off part of the leak to recover some of the gushing oil, yet not surprisingly found itself without sufficient surface vessels to carry away the siphoned oil.”
Meanwhile, the country's spirits and equity markets continued to decline:
Rather than repeat here the overwhelming and heartbreaking documentation of the BP Deepwater Horizon Oil Spill disaster already available to everyone on the planet, the writer will summarize the situation with the following personal refection from April 21, 2010:
When the news of the Deepwater Horizon disaster first broke on April 20, 2010, this writer was moved the very next day to pen the following brief 4-part narrative about how surprising it was that the explosion and loss of life occurred at all, given the following initial assumptions:
- Past disasters surely have by now taught all private and public enterprises involved to prepare for the worst, even when risks were considered minimal (Titanic, Three-Mile Island, Chernobyl, the Exxon Valdez, the 1979 Ixtoc I well explosion in the Bay of Campeche off the coast of Mexico, etc);
- Both mechanical and electronics technology have advanced so dramatically that fail-safe offshore drilling for and extraction of oil even a mile deep would now be routine, and that if any industrial sector had the money to afford the best technology, the oil industry did;
- Moreover, that before commencing such projects at all, the involved entities would have been fully-prepared ethically and physically for any emergency and have back-up plans and safety equipment in place in advance to deal with any contingency; and finally
- Since the Obama Administration had recently decided that limited offshore drilling in rare circumstances might make sense after all, despite the Obama Administration's original total opposition to such drilling due to environmental concerns, the public might thus assume that the Obama Administration had by now replaced the previous individuals in the appropriate US regulatory agencies over the last year, and that these new government experts had competently blessed the notion of new and existing offshore wells in very specific situations.
As the horrible events, repeated disappointments and devastating oil spillage in the Gulf have continued over the last seven-plus weeks, we find that none of the four (4) naïve assumptions listed above was true in the Deepwater Horizon disaster, or if any part of any such assumption might be true or advisable, it was not acted upon in advance or even since the disaster occurred.
Media coverage of every daily set of disappointments resulting from the Gulf Oil Spill has been extensive, but short on insight.
This writer will not attempt the former here, but he has evolved a personal theory regarding the latter:
“Stated simply, the Gulf Oil Spill has crept both directly and insidiously into the collective psyche of the American people, and this disaster is itself chiefly responsible for slowing the emerging US economic recovery in its tracks, as it has shaken our traditional confidence that was just beginning to be restored. Likewise, its spin-off effects are felt worldwide.
US stock markets are retreating, private US hiring in May took a real hit compared to April, thousands of unemployed people have stopped looking for work, state and local budget woes seem intractable, pension programs are hurting, consumer confidence is edgy, foreign issues suddenly loom larger (European debt, decline of the euro), and so on.
Moreover, this oil spill disaster has temporarily diluted public and private confidence in President Obama, since the US Government has also appeared to date to have been partially stymied by the inability of BP or any others to stem the flow of oil into the Gulf resulting from this disaster.
The good news is that America will eventually overcome this local blow to our collective psyche (over time and at a dear price) and get us all back on the path of consistent economic recovery from these temporary woes.
BP apparently made a series of money-saving shortcuts and blunders that dramatically increased the danger of a destructive oil spill in a well that an engineer ominously described as a "nightmare" just six days before the blowout. The US House Energy and Commerce Committee released dozens of internal documents on June 14, 2010 that outline several problems on the deep-sea rig in the days and weeks before the April 20 explosion that set in motion the largest environmental disaster in US history. The committee has been investigating the explosion and its aftermath. "Time after time, it appears that BP made decisions that increased the risk of a blowout to save the company time or expense. If this is what happened, BP's carelessness and complacency have inflicted a heavy toll on the Gulf, its inhabitants, and the workers on the rig,"said Democratic Reps. Henry A. Waxman and Bart Stupak.
At press time for this issue of EDA WEEKLY, the New York Times reported that President Obama would use his first Oval Office speech on the evening of June 15, 2010 to outline a plan to legally compel BP to create an escrow account to compensate US businesses and individuals for their losses from the oil spill in the Gulf of Mexico. Mr. Obama would press for the escrow account if BP does not establish one voluntarily. The board of the London-based company was planning to discuss the idea and other spill-related issues — including the controversy over a big dividend for shareholders coming due this summer — at an emergency board session on June 13, 2010.
Simultaneously, the Wall Street Journal reported that recent stock turmoil is generating unease among market analysts. Noting that the Dow fell 12.4% between April 26 and June 7, the Journal says that the only precedent for such a decline in the last 80 years at this point in an economic recovery is 1950, when the Korean War broke.
II. Recent EDA-related News Highlights:
EDA WEEKLY readers may recall the December 22, 2009 issue entitled, “Virage Logic – On the Move!” You may still access that article at this URL:
EDA WEEKLY readers may also be familiar with the Electronics IP Industry Commentaries published quarterly by Henke Associates on EDACafe.com. Indeed, the most recent IP Commentary was just posted on June 4, 2010:
Among the current IP Group of Six (the IP G6) covered each quarter in the Electronics IP Industry Commentaries is IP vendor Virage Logic Corporation.
Well, it looks like the IP G6 will soon become the Group of Five … the IP G5. As described in the following News Highlight, EDA “Big 3” member Synopsys will soon acquire Virage Logic, just as Big 3 member Mentor Graphics acquired IP vendor LogicVision last summer, making the G7 into the G6 at the time. The third member of the Big 3, Cadence is also active in the IP realm, announcing in May 2010 that it had entered into a definitive merger agreement with Denali Software, Inc. in which Cadence will acquire Denali for $315 million in cash (see June 4 Electronics IP Industry Commentary mentioned above). The $315 million figure seems popular, as we will see below. Just a coincidence.
On June 10, 2010 Synopsys, Inc. and Virage Logic Corporation announced that they have signed a definitive agreement for Synopsys to acquire Virage Logic. Synopsys said that Virage Logic's offerings will complement Synopsys' DesignWare® interface and analog IP portfolio by adding embedded memories with test and repair, non-volatile memories (NVMs), standard cell libraries, and programmable cores for control and multimedia sub-systems. With this acquisition, Synopsys will add to its ability to help design teams achieve their system-on-chip (SoC) development goals by providing them with a more comprehensive portfolio of production-proven, high-quality IP and worldwide technical support.
Assuming consummation of the terms of the agreement, Synopsys will pay $12.00 cash per Virage Logic share, resulting in a transaction value of approximately $315 million, or approximately $289 million net of cash acquired. The transaction is still subject to regulatory and Virage Logic shareholder approval, as well as other customary closing conditions.
The boards of directors of both companies have already approved the transaction, under which current Virage Logic President and CEO Alex Shubat will join Synopsys. After the closing, Virage Logic will become part of Synopsys, and Virage Logic stock will cease trading. The transaction is expected to close in the fourth quarter of Synopsys' fiscal 2010 (i.e. between November 1, 2010 and January 31, 2011).Therefore, Synopsys anticipates the transaction will be neutral to its non-GAAP earnings per share in fiscal 2010, and accretive in fiscal 2011 (i.e. beyond January 31, 2011).
"With more functionality being integrated into a single device, high-quality IP continues to be key for enabling designers to reduce integration risk and speed time-to-market," said Dr. Aart de Geus, chairman and CEO at Synopsys. "Bringing Synopsys and Virage Logic together broadens our portfolio and builds on two very strong technical teams. It is also in line with what so many customers are looking to Synopsys to address: a way to quickly incorporate standard functions into their SoCs so they can focus on developing differentiated products."
"When I co-founded Virage Logic in 1996, it was with the belief that a semiconductor IP company could provide the technically superior building blocks that the industry needed to accelerate development of high quality, cost-effective end products," said Dr. Alex Shubat, president and CEO of Virage Logic. "Today, the transition to a fabless, or 'fab-lite' model, coupled with the explosion in SoC product development costs at the advanced process nodes, has resulted in an escalating need by the semiconductor manufacturers for production-proven IP. By joining forces with Synopsys' impressive engineering team and by gaining access to their global channel, we will be able to accelerate the development and delivery of our broad product offering to help customers meet their design-for-profitability goals. I am excited to join Synopsys to further my original vision."
On June 7, 2010 Federal Reserve Chairman Ben Bernanke said, “I am hopeful (that) the (US) economy will gain traction and not fall back into a 'double dip' recession. My best guess is we will have a continued recovery, but it won't feel terrific." Addressing the Woodrow Wilson International Center for Scholars, Bernanke also said that "economic growth won't be robust enough to quickly drive down the unemployment rate, now at 9.7%. The central bank would probably have to start raising interest rates before the economy returns to full employment or if inflation surges.”
Also on June 7 the Federal Reserve Bank of Chicago said attendees at its Automotive Outlook Symposium are predicting growth rates of 3.1% this year and next for the US economy. Most of the major components of real GDP -- particularly consumer spending and business fixed investment --are expected to contribute to the improved forecast.
On May 27, 2010, the EE Times reported that the global chip market is expected "to see a rise in annual growth in the next decade, to about 8% to 10% on average, due to the demands of environmental engineering on semiconductor technologies," according to Matthew Towers, CEO of Intex Management Services Ltd. "These demands will be additive to those of the information and communications technology sectors, which semiconductors are already meeting and which were responsible for growth of 6% to 7% annual growth in the first decade of the 21st century." However, the "sector will continue to suffer from the 'bullwhip amplification' effect," and "the result is that a change in global GDP tends to produce a tenfold effect in the chip market and an even larger effect in the market for semiconductor manufacturing equipment,” Towers said.
In its latest report on June 1, 2010 The Semiconductor Industry Association (SIA) said that worldwide semiconductor sales in April 2010 were $23.6 billion, an increase of 2.2% from March when sales were $23.1 billion. Sales in April 2010 increased by 50.4% from April 2009 when sales were a meager $15.7 billion. Sales for the first four months of 2010 were $92.6 billion compared to $60.1 billion for the like period of 2009, an increase of 54.2%. All monthly sales numbers represent a three-month moving average. “Global sales of semiconductors grew at a healthy rate in April 2010, surpassing the previous monthly record level of November 2007,” said SIA President George Scalise. “As expected, both the year-on-year and sequential growth rates moderated slightly. The unusually high year-on-year comparison is a reflection of the trough of the recession in early 2009 compared to strong demand today. Important contributors to current growth of semiconductor sales include the worldwide adoption of 3G wireless communications and consequent investment in infrastructure and recovery of demand from the enterprise, automotive, and industrial sectors. Going forward, we expect semiconductor sales will return to historical seasonal patterns. Future growth of the industry remains heavily dependent on the continued global economic recovery, and in particular, on continued growth in the developing markets that are the largest demand drivers for our products,” Scalise concluded.
While HP recently said it would soon lay off some 9000 workers, it was also announced that HP will develop ways for smartphone users to print documents without utilizing a computer.
The recent unveiling of Apple's Newest iPhone has caused widesoread coverage in major news sources. Analysts noted that while the new device does not include many surprise features, its launch should help Apple reestablish itself in the smartphone market. The new version is said to be faster and thinner than previous models, with a crisper display and a more angular look. It includes a 5-megapixel camera that can shoot and edit high-definition video.
According to analysts, the new phone came at an opportune moment for Apple, as buyers have been faced with an increasingly large array of attractive smartphones.
The latest report from the EDA Consortium (EDAC) Market Statistics Service (MSS) was released on April 01, 2010. (The next EDAC Report covering Q1 2010 will not be available till after July 1, 2010). In its April 01, 2010 report, EDAC announced that the total Electronic Design Automation (EDA) industry revenue for Q4 2009 was $1262.7 million, an 8.1% sequential increase from Q3 2009. However, on a year-over-year basis, the total Q4 2009 EDA industry revenue of $1262.7 million represented a 4.2% decline, compared to $1318.7 million in Q4 2008. “Despite the year-to-year decrease, the EDAC revenue numbers (for Q4 2009) continue to show a sequential increase over the previous quarter,” said Dr. Wally Rhines, EDAC chair and chairman and CEO of Mentor Graphics.
On May 19, 2010 it was reported that the Executive Committee of the Design Automation Conference (DAC) and the EDA Consortium (EDAC) planned to host their annual Kick-Off Reception at this year's DAC conference in Anaheim, California. The reception was to be held at the Hilton Anaheim on Sunday, June 13, 2010, and for the first time was sponsored by EDA customers under the theme 'Customers Celebrate EDA Vendors.' “A positive sentiment is building between semiconductor leaders and the EDA community,” said Kathryn Kranen, vice-chairperson of the EDA Consortium and board sponsor of the EDAC tradeshow committee. “As the semiconductor business continues to increase from a year-long global slump, major leaders in that industry have stepped forward with a symbolic gesture to thank EDA vendors for their continued innovation and support. The 'Customers Celebrate EDA Vendors' sponsorship is a testament to both communities and to the significance DAC plays in bringing customers and vendors together each year.” The DAC 2010 Kick-Off Reception sponsors were ARM, Intel, NVIDIA, QUALCOMM, and STMicroelectronics.
By the time this edition of the EDA WEEKLY is posted (June 21, 2010), this year's Design Automation Conference held in Anaheim CA will he history (June 13 - 18, 2010). But as of press time, DAC 2010 is just around the corner:
Over 8000 attendees were expected to examine the EDA product capabilities of over 200 exhibitors. Four of the EDA G5 (Cadence, Magma, Mentor Graphics and Synopsys) will each have been well represented at the show, with the “Big 3” acting as major exhibitors:
III. The Now: How did the G5 EDA Vendors fair during the nominal First Quarter of 2010?
As Table 1 reveals, the combined G5 revenue total of $785.5 million for nominal Q1 2010 barely edged the $781 million for Q1 last year, by less than 1%. Both Cadence and Synopsys were up, but Mentor and Magma were down.
As is quite natural, nominal Q1 2010 combined G5 revenue was less than the sequential combined total in Q4 2009, but this time Mentor was primarily responsible, with its Q1 2010 revenue off by -24% from a monster Q4 2009 revenue result.
Turning to earnings in Table 2, Q1 2010 found that three of the four EDA Vendors reporting had slipped into red ink on a GAAP basis, with only Synopsys’ consistent profitability keeping the G4 total Q1 2010 net income barely into black ink. But hey, what’s a sequential negative difference like Q4 2009 to Q1 2010 of $167.29 million in quarter-to-quarter profit mean among friends? It means that the G4 total profit of $4.07 million in Q1 2010 was $167.29 worse than the $171.36 million total G4 profit in the just prior Q4 2009! On the other hand, Q1 2010’s G4 total profit of $4.07 million was an improvement of $41.89 million over the G4 total loss of $37.82 million in Q1 2009 (i.e. year over year).
Last year in Q1, the same three vendors were also in red ink, but even Synopsys' Q1 2009 profit of over $48 million could not offset the losses among the other three back then, especially Cadence's $63 million Q1 2009 net loss.
IV. Company by Company Q1 2010 details:
On April 14 2010 Altium Limited (ASX: ALU) reported sales and revenue results for nominal Q1 2010, the quarter ending March 31, 2010.
- Q1 2010 sales of US$11.1 million, an increase of 14% over the $9.7 million equivalent period a year ago Q1 2009.
- Q1 2010 revenue of US$11.3 million, an increase of 13% over the $10 million equivalent period a year ago Q1 2009.
“Even though we are expecting to release a significant upgrade to our flagship AltiumDesigner product during Q4, and the momentum of companies switching to our design solutions continues, we will continue to manage things tightly in an unpredictable environment."
On a region by region basis, measured in local currency, on a year over year basis, sales in the Americas were up 5% to $4.33 million; sales in Europe were up 31% to € 3.21 million,; sales in Asia-Pacifc were up 32% to $1.34.million; sales in China were down 16% to 0.925 million, and consulting was also down 80% to € 0.04 million.
EDA Commentary readers are encouraged to sift through the detailed profile on happenings at Altium Limited posted in EDA Weekly on EDAcafe.com on March 01, 2010, available permanently at the following URL:
Altium's self description:
Altium Limited (ASX:ALU) provides next-generation electronics design solutions that break down the barriers to innovation. Altium's solutions are unique because they unify the separate processes of electronics design, all within a single electronics design environment, working off a single data model, linking all aspects of electronics product design into one process.
This unified design environment helps electronics designers easily 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, sales offices in the United States, Europe, China, and resellers in all other major markets. For more information, visit www.altium.com.
On April 28, 2010 Cadence Design Systems, Inc. (NASDAQ: CDNS) announced its financial results for the first quarter of its fiscal year and the calendar year 2010, the period ending March 31, 2010.
Cadence reported Q1 2010 revenue of $221,938,000 [$222 million], less than 1% better than the $220,279,000 [$220] million in sequential Q4 2009, but 7.58% improved compared to revenue of $206,302,000 [$206] million reported for the same period year over year in Q1 2009.
On a GAAP basis, Cadence endured a net loss of $11,785,000 ($11.8 million), or $(0.04) per share on a diluted basis, in the first quarter of 2010, going in the wrong direction compared to a net profit of $1,790,000 [$1.8 million], or $.01 per share in sequential Q4 2009, but of course significantly improved over the disastrous net loss of $63,257,000 ($63.3 million), or $(0.25) per share on a diluted basis in the same period year over year in Q1 2009.
Cadence's Q1 2010 revenue of $220 million was at the top of the range of guidance provided last quarter, and loss per share of 4 cents was much better than the guidance of a loss of 8 cents to 10 cents.
"Cadence is off to a good start in 2010. The team executed across the board and our focus on customer engagement continues to yield success," said Lip-Bu Tan, president and chief executive officer.
"Business improved in all geographies with strength in Asia and North America, and in all platform areas, especially verification, custom and digital design."
"We put up another consistent operating performance in the first quarter with our key operating metrics meeting or exceeding our expectations," said Kevin S. Palatnik, senior vice president and chief financial officer.
For Q2 2010, the company expects total revenue in the range of $215 million to $225 million. Second quarter GAAP net loss per diluted share is expected to be in the range of $(0.05) to $(0.03).
For the full year 2010, the company expects total revenue in the range of $865 million to $900 million. On a GAAP basis, it still expects a net loss per diluted share for fiscal 2010 in the range of $(0.23) to $(0.13).
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. Cadence and the Cadence logo are registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
On May 27, 2010 Magma® Design Automation Inc. (NASDAQ:LAVA) reported revenue of $33.609 million for its fourth fiscal quarter ending May 2, 2010, which is treated herein as nominal Q1 of 2010. While Q1 2010 revenue was above the $32.5 to $33.0 million guidance range given three months ago, Q1 2010 revenue was still down 1.35% compared to the same quarter last year, when Magma recognized $34.070 million in revenue. For the just prior nominal Q4 2009, Magma reported just $30.96 million, so Q1 2010 was up 8.56% sequentially.
Magma also reported $123.077 million for its 2010 fiscal year, the period ending May 2, 2010. This result was above the guidance for the year given 3 months go, but it is down some 16.2% from the revenue of $146.857 million realized last year.
"Magma is in a much stronger position than a year ago, both in terms of products and financial performance," said Rajeev Madhavan, Magma chairman and chief executive officer.
"Our key product groups - Talus, Titan, FineSim and Quartz - are demonstrating competitive strength and continuing to improve their traction in the market. As to our financial performance in fiscal 2010, we beat all guidance ranges and continued consistent cash generation. We are optimistic as we enter the new fiscal year."
GAAP Income Results
In accordance with generally accepted accounting principles (GAAP), Magma improved to a net loss of $728,000, or $(0.01) per share (basic and diluted), for nominal Q1 2010 compared to a net loss of $9,894,000, or $(0.21) per share (basic and diluted), for the year-ago Q1 2009. In the just prior Q4 2009, Magma lost $2,600,000 or $(0.05) per share.
The net loss per share in nominal Q1 2010 of one cent was far better than the guidance for nominal Q1 2010 given three months ago, when the guidance forecasted a Q1 2010 loss per share of 8 to 9 cents.
For the entire year, fiscal 2010 Magma reported a GAAP net loss of $3.334 million, or $(0.07) per share (basic and diluted), compared to a net loss of $129.242 million, or $(2.89) per share (basic and diluted), for fiscal 2009.
Since revenue was down fiscal 2010 to fiscal 2009 by some 16%, the reduction in net loss this year vs. last year of $125.908 million must have been what Mr. Madhavan was referring to in his comments about “stronger financial performance” above.
For Magma's nominal Q2, ending August 1, 2010, the company expects total revenue in the range of $31.0 million to $31.5 million. GAAP net loss per share is expected to be in the range of $(0.07) to $(0.06).
Then for Magma's fiscal 2011, ending May 1, 2011, the company expects total revenue in the range of $130.0 million to $133.0 million. GAAP net loss per share is expected to be in the range of $(0.16) to $(0.14). A Financial Data Supplement containing additional first quarter and full fiscal year 2011 guidance, as well as detailed financial information intended to provide further insight into Magma's business is available online on the Magma website: http://investor.magma-da.com/supplement.cfm
Magma self sescription:
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.
On May 28, 2010 Mentor Graphics Corporation (NASDAQ: MENT) announced results for its fiscal first quarter ending April 30, 2010, treated here as nominal Q1 2010.
For the nominal Q1 2010, the company reported revenues of $180.6 million, down 6.81% year over year from revenues of $193.8 million in Q1 2009, and down 23.83% sequentially from $237.1 million in the just prior and traditionally stronger nominal Q4 2009. Guidance for Q1 2010 given some 3 months ago was for Q1 2010 revenue to be $180 million.
GAAP net loss in Q1 2010 came to $23,025,000, or a GAAP loss per share of $0.22. This compares unfavorably to a year over year GAAP loss of “only” $12,956,000 in Q1 2009 ($0.14 loss per share). The $23.0 million loss in Q1 2010 is fully $62.4 million worse than the $39.4 million in net income achieved in the just prior Q4 2009. Mentor missed its Q1 2010 earnings forecast by plenty; guidance for Q1 2010 some 3 months ago was for earnings per share to be in the range of $0.00 to a loss of only 5 cents per share.
“While the quarter's bookings were lower than last year due to the concentration of scheduled renewals in the second half of this year, the renewals that did occur in the first quarter were very strong, growing 25% from their prior contract values for the renewals within our top ten contracts,” said Walden C. Rhines, CEO and chairman of Mentor Graphics.
“Leading indicators that we have historically tracked were also very positive: support reinstatements grew 70%; our base business, orders less than $1 million typically from smaller customers, grew 20% over the year ago quarter; and consulting and training bookings grew 25% over last year.”
For nominal Q2 2010 ending July 31, 2010, the company expects revenues of about $180 million, and GAAP loss per share of $0.17 to $.022. For the full year the company expects revenues of $870 million, and GAAP earnings per share of $.10 to $.15.
During the quarter, the company reported that it had extended its customer partnerships with three significant new relationships:
- Mentor joined the Nano2012 program led by STMicroelectronics, in partnership with the French government, to develop leading-edge technologies for 32nm and below processes.
- Freescale Semiconductor named Mentor Graphics its commercial Linux strategic partner.
- NetLogic Microsystems entered into a strategic collaboration with Mentor Graphics to provide multi-core multi-threaded Linux for their processors.
“Despite two sizeable acquisitions in the last year, our operating expense is still down on an absolute basis year on year. We expect our continued strong emphasis on cost controls, as well as an improving foreign exchange environment, particularly the Euro, positions us well for the year,” said Gregory K. Hinckley, president of Mentor Graphics.
“This fifth consecutive quarter of meeting or beating guidance, given our transparent real-time financial model, gives us confidence that the (economic) recovery is continuing.”
During the quarter, Mentor strengthened its offerings to the DO-254  market with a joint announcement of a product flow with The MathWorks, extensions to Mentor's HDL Designer product to support DO-254 coding standards, and a new product, the ReqTracer™ tool, that helps automate requirements capture.
The company's Mechanical Analysis Division launched FloTHERM® IC for semiconductor package thermal characterization and design. Mentor launched 3D electromagnetic analysis for its HyperLynx® printed circuit board product line.
The company completed its previously announced acquisition of Valor Computerized Systems which offers PCB manufacturing software and also acquired technology that provides on-demand electrical schematics for automobile dealerships. In early May 2010, Mentor launched its Calibre® InRoute software which fully integrates its Calibre tools into its Olympus-SOC™ place and route environment. This allows designers to invoke Calibre verification and design-for manufacturing tools from within the place and route environment to verify and improve designs much faster, significantly speeding time to design closure.
In April 2010, the Valor® MSS Software suite won the Circuits Assembly New Product Introduction Award and the 2010 Surface Mount Technology Vision Award. Design News granted FloEFD™ mechanical analysis technology its Golden Mousetrap Award for Best Product.
In February, the International Engineering Consortium honored HyperLynx Power Integrity with its annual Design Vision Award in the System Modeling and Simulation Tool Category. Additionally, Mentor's Dr. Vladimir Székely received the Dennis Gabor Award for Innovation, the country of Hungary's highest technical honor.
EDA Commentary readers are encouraged to sift through the detailed profile on happenings at the Mentor Graphics Mechanical Analysis Division posted in EDA Weekly on EDAcafe.com from December 07, 2009 to December 22, 2009, and available permanently at the following URL:
 Footnote: RTCA/DO-254, DESIGN ASSURANCE GUIDANCE FOR AIRBORNE ELECTRONIC HARDWARE is a document providing guidance for the development of airborne electronic hardware, published by RTCA, Incorporated. The DO-254 standard was formally recognized by the FAA in 2005 via AC 20-152 as a means of compliance for the design of complex electronic hardware in airborne systems. Complex electronic hardware includes devices like Field Programmable Gate Arrays (FPGAs), Programmable Logic Devices (PLDs), and Application Specific Integrated Circuits (ASICs). The DO-254 standard is the counterpart to the well-established software standard RTCA DO-178B /EUROCAE ED-12B. With DO-254, the FAA has indicated that avionics equipment contains both hardware and software, and each is critical to safe operation of aircraft. There are five levels of compliance, A-E, which depend on the effect a failure of the hardware will have on the operation of the aircraft. Level A is the most stringent, defined as "catastrophic", while a failure of Level E hardware will not affect the safety of the aircraft. Meeting Level A compliance for complex electronic hardware requires a much higher level of validation and verification than Level E compliance.
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 and semiconductor companies. Established in 1981, the company reported revenues over the last 12 months of about $800 million. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web site: http://www.mentor.com. (Mentor Graphics, FloTHERM, HyperLynx, Calibre, and Valor are registered trademarks and ReqTracer, Olympus-SOC, and FloEFD are trademarks of Mentor Graphics Corporation. All other company or product names are the registered trademarks or trademarks of their respective owners.)
On May 19, 2010 Synopsys, Inc. (NASDAQ: SNPS) reported results for the second quarter of its fiscal year 2010, the period ending April 30, 2010. As is our practice, this quarter will be treated as nominal Q1 2010 for purposes of this EDA WEEKLY article.
For nominal Q1 2010, Synopsys reported revenue of $338,106,000 [$338.1 million], less than 1% growth compared to $336,835,000 [$336.8 million] for year over year Q1 2009, and up 2.4% compared to $330,167,000 [$330.2 million] in sequential Q4 2009.
Guidance provided 3 months ago by Synopsys for Q1 2010 was for revenue between $331 million and $339 million, so they actual result of $338.1 was near the top of the forecat range.
"Synopsys again delivered solid results this quarter," said Aart de Geus, chairman and CEO of Synopsys.
"While the customer backdrop remains cautious, we continue to execute well on our strategy to address customer needs ranging from mainstream to the most advanced silicon design flows, all the way to the rapidly growing IP and systems space. This quarter we made particular progress in the latter, where we believe we have an especially promising outlook."
On a generally accepted accounting principles (GAAP) basis, net income for Q1 2010 was $39,549,000 [$39.5 million], or $0.26 per share, down 18.1% compared to $48,288,000 [$48.3 million], or $0.33 per share, for Q1 2009. Synopsys of course had no prayer that the net income [$39.5 million] in Q1 2010 could match the extra-large sequential Q4 2009 net income of $132,786,000 [$132.8 million].
Synopsys also provided its financial targets for the nominal Q2 2010:
Revenue: $330 million - $338 million
GAAP expenses: $275 million - $292 million
Other income and expense: $0 - $3 million
Fully diluted outstanding shares: 149 million - 154 million
GAAP earnings per share: $0.21 - $0.27
Revenue from backlog: greater than 90%
Synopsys' self description:
Synopsys is a world leader in electronic design automation (EDA), supplying the global electronics market with the software, IP and services used in semiconductor design and manufacturing. Synopsys' comprehensive, integrated portfolio of implementation, verification, IP, manufacturing and 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 more than 60 offices located throughout North America, Europe, Japan, Asia and India.
V. EDA Vendor Q1 2010 Stock Performances
The first four columns of Table 3 below reveal that the combined total of the G4 stocks appreciated in value during the three calendar months of Q1 2010, but only by less than 1%. Meanwhile, both the NASDAQ and the DOW gained value in mid-single digit percentages. Both Cadence and Magma managed to add double-digit percentages to their stock prices during Q1 2010, but Mentor was down more than 9% and Synopsys was flat.
Turning to the last two columns in Table 3, one can see that over the course of the entire EDA G4 year April 2009 to March 2010, the G4 total stock value gained almost 32%; however, both the NASDAQ and even the DOW did better, the NASDAQ by a handy 15+ percentage points and the DOW by 11+.
VI. Post Q1 2010 Stock Prices
To better understand the impact of the Deepwater Horizon disaster on both the general economy and on the EDA G4 vendors, let's next take a look at the G4 stocks' performances after Q1 2010 closed. Table 4 below provides a picture of the post-Q1 2010 positive rise in the EDA G4 stocks within a rising NASDAQ Composite, increases which lasted until ~April 23, 2010, i.e. until a few days after the news of the Deepwater Horizon explosion on April 20 became common knowledge. Whereupon, a post-explosion decline began that has continued until press time for this issue of EDA WEEKLY.
The EDA G4 total had gained nearly 11% in value in the first 23 days after April 1, 2010, while the overall NASDAQ Composite had risen 5.5%. Between April 24 and press time, the EDA G4 total had forfeited its entire 23 day gain and then some, while the NASDAQ had given up more than 14% of its April 23 peak value.
A chart of the NASDAQ Composite for the post-Q1 2010 three months was shown in section I. The Economic Environment: Progress Interruptus. That chart verifies the trends of Table 4 above. Each of the G4 vendors possesses a similarly-contoured chart for the 3 month period.
It is also constructive to look at the stock charts of each of the G4 vendors for the last six months. Both the behaviors of the stock during Q1 2010 and the stock after March 31, 2010 can be observed, as well as the performance of each stock vs. NASDAQ. Lastly, the NASDAQ Composite index chart is shown by itself for the last six months. Once again, the deterioration after ~April 23 is clearly visible in all these charts.
For the record, and to maintain the proper perspective, here are the Market Capitalizations for each of the EDA G4 vendors, as of June 9, 2010:
… and for an interesting comparison:
The writer would like to acknowledge the sources of data and information for this issue of EDA WEEKLY: Yahoo! Finance; Google Finance; The SIA; and The EDA Consortium. Ongoing support by the team at IBSystems, Inc., including but not limited to Sanjay Gangal, Adam Heller, David Heller, Jon Heller, Nitai Fraenkel, and Sumit Singhal, is also appreciated.
You can find the full EDACafe event calendar here.
To read more news, click here.
-- Russ Henke, EDACafe.com Contributing Editor.