What Do Analysts Know That We Don’t Know?

“Never miss an opportunity to keep your mouth shut”.

I googled this quote and it looks like it might have been Mark Twain or Abraham Lincoln or someone around those times. Whoever it was, I took their advice last week regarding the Cadence – Mentor acquisition, at least as far as anything on this blog was concerned. I have my views as to what will likely happen, but I’ve expressed them privately for the most part. Instead, I was listening to what others had to say.

And boy are there lots of opinions! As the dust settles, I’ve noticed something very interesting. There seems to be two camps.

In one camp are the people who are opposed to the merger or feel it won’t work. I must admit that this is the camp I am in, informed by 14 years in the EDA industry and bystander to several mergers, good and bad. The specific reasons have already been covered by others. They raise the spectre of Daisy/Cadnetix, pointing out significant product overlap, the difference of corporate cultures, FTC concerns, etc.

In the other camp are those who think this is a good idea, good for the industry, good for the companies, good for the shareholders. And they are mainly from the financial analyst and investment community. I admit, I have only a rudimentary understanding of the Wall Street side of the business, and the finances involved, so I ask you for your help to explain to me…

What do the Analysts Know that We Don’t Know?

harry the ASIC guy

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One Response to “What Do Analysts Know That We Don’t Know?”

  1. Lou Covey says:

    Here’s what the analysts and Wall Street see:

    Most EDA tools is that they were created with one customer in mind and adapted (patched) over and over to make it usefule to others. As explained to me many times, every EDA company was targeting only 10-15 customers 10 years ago. Due to consolidation, that number is now 5 -10 customers. Many of the tool users are overseas in countries that do not follow international patent laws and will not pay full price for EDA tools. EDA companies, rather than try to create new markets, are constantly working to steal market share AND budget share from a shrinking pool of customers. The financial gains seen in EDA over the past five years are negated by the falling dollar in Europe and Asia, so there is no growth. The EDA industry is constantly reducing marketing efforts and throwing what remaining money is left into shrinking trade shows that charge higher and higher fees.

    EDA, from the financial side, is a shrinking market, with questionable valuations, facing increasing development and economic pressures worldwide, with flat revenues now in in the foreseeable future, little third-party scrutiny (i.e. press) and an aging management, all chasing shrinking budgets.

    Technology, corporate culture and product overlap are all microeconomics. The macroeconomics are scary.

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