A Scalpel or a Hatchet?

I spoke to a friend of mine at Cadence yesterday morning.

“I came in this morning and tried to log on and I couldn’t.  Turns out I must have mistyped my password, but I was worried there for a minute.”

That seems to sum up the mood at Cadence yesterday as the Turk made his way through the hallways of Cadence worldwide. “I think I’m going to go on vacation for the rest of the day”, my friend said later.

By now, I’m sure you’ve heard it from friends, or read it in EE Times or on John Blyler’s blog, that Cadence cut “at least” 625 jobs or 12% of it’s workforce.  John Blyler’s sources say the impact will be closer to 1000 jobs once contractors and others are added in.

The speculation has been going on for several weeks including an interesting exchange on the Yahoo message boards as to how deeply and in what manner Cadence would cut.  Would they take out a scalpel and trim the fat from organizations across the board?  Or would they focus on key areas with technological advantage and hatchet off areas that were non-competitive? Cadence CTO Ted Vucurevich mocked the idea that Cadence would sell off any businesses. Yet, the official press release says that Cadence “emphasized those market segments where Cadence enjoys a leadership position, such as mixed-signal design, advanced verification, and low-power design”, implying it was de-emphasizing other businesses.

So … do we have any idea if these cuts were made with a scalpel or with a hatchet? Here is what I’ve been able to pick up from others regarding what Cadence is doing to save expenses:

  • From the official 8-K report: “(e) Cadence has determined that no payment shall be made to Cadence’s named executive officers or the other participants in the Cadence Senior Executive Bonus Plan for performance in fiscal 2008.” I don’t think this eliminates the golden parachute, but at least it weighs a little less.
  • At least some middle management was let go, including first line managers and some long-time Cadence employees. It seems they are trying to cut the “deadwood” like any organization does now and again but from the management side first. And the impact to the rank and file seems to be less than it could have been. Still, having gone through similar times at Synopsys before, I know that a lot of these people are experienced EDA veterans and good people to have in the organization and I wish them well.
  • All, or a substantial part of their tech pubs was let go. (Makes sense since they can contract this out).
  • IT was hit, though not sure how deep. (Can always move their infrastructure to the cloud or outsource IT - now wouldn’t that be ironic).
  • Berkeley Labs was hit hard or perhaps even shut down (who needs research?)
  • Their DFT R&D group was impacted, perhaps a signal as to their plans for this product line (just a bunch of IBMers anyway).

As yet, there is no indication that entire products are going away, but it’s still early.  Cadence has yet to speak to the investment community since the Fister resignation and delaying their earnings release due to the discovery of an “accounting error”. Personally, I think it will be painful for a company that has endeavored to provide a “complete flow”, to sell off a product and create a hole in that flow.  If they do sell off products, it will be around the edges, not in the core EDA flow.

Take a look at Gary Smith’s analysis from the time that Cadence bid to take over Mentor (can you believe it’s been  just over 4 months since the offer). The tools where Cadence has low market share and are possible targets for the hatchet:

  • Design for Manufacturing
  • Physical Verification
  • Design For Test
  • Static Timing Analysis
  • Synthesis

What do you think? Can you see Cadence divesting any of these products?  Or do you think there are others that might go away? Which product would you definitely not let go?

Inquiring minds want to know….

harry the ASIC guy

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3 Responses to “A Scalpel or a Hatchet?”

  1. David Muncier Says:

    I would agree with Gary that if Cadence wants to maintain premiums on their remaining differentiated products they must avoid bundling / FAMing / eCarding, and they are going to have to flush the “also rans” that Gary identified. It sounds like they are already going down this path on DFT.

    On the other hand, that’s a painful rethinking of the company strategy and will lead to much smaller, albeit more profitable, company.

    No knowledge, just the repressed MBA in me running wild.

  2. Sean Murphy Says:

    They need to determine who their leadership is before they can decide on real strategy. These feel like temporizing moves: I am not sure I understand your scalpel vs. hatchet; if they cut approx 1,000 FTE’s (according to John Blyler’s post http://www.chipdesignmag.com/blyler/2008/11/05/cadence-eliminates-at-least-12-of-workforce/ ) Then this is closer to a 20% layof.

  3. harry Says:

    The scalpel vs. hatchet metaphor is whether Cadence is “trimming the fat” vs. deciding to exit entire products. From those I’ve spoken to, it looks like Cadence has so far (a) gotten rid of most of the executive staff, (b) a lot of high-paid VPs and Directors that may have been brought in during the Fister regime, and (c) trimmed organizations that were not contributing as much like tech pubs, IT, etc. These are all positive moves but I agree that none of them says that they are exiting any particular business. The rank and file, despite their apprehension about their own jobs, seem to agree with what has been done so far. Now that the fat is trimmed, the real painful cuts will need to happen, as you say, once there is real leadership.

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