Last night you may have watched the NBA Playoff game in which the Orlando Magic came back to defeat the heavily favored Cleveland Cavaliers. Great game!!!
Or the finale of American Idol in which Kris Allen came back to defeat the heavily favored Adam Lambert. Great show!!!
What did I do last night? I listened to the Q2 2009 Synopsys earnings call. Great conference call!!!
(OK … I’ll admit it wasn’t as exciting and nail biting as either of the other viewing options. Just think of it like this: I took on the work of listening to the call and summarizing it for you, in order to free you up to watch the game or idol. You can thank me later )
Here’s the summary. (You can read the full transcript here if you like).
On the up side, Synopsys had a good Q2, beating their revenue and earnings per share guidance slightly. On the down side, Synopsys lowered its revenue and cash flow guidance slightly for the rest of the year, allowing for potential customer bankruptcies, late payments, and reduced bookings. Customers are approaching Synopsys to “help them right now through this downturn”, i.e. to reduce their cost of software. It looks like the recession is finally catching up to them.
As I finish off this post on Thursday morning, it looks like the analysts agree. Synopsys shares are down 10%, so it seems they are getting punished for revising their forecast.
Still, Synopsys is in very good financial health, with $877M in cash and short term investments. Their cash flow is going to go down the rest of the year, so they will eat into this fund, but they will still have plenty to selectively acquire strong technology that might add to their portfolio, as they did with the MIPs Analog Business Group.
There were 2 themes or phrases that kept recurring in the call that I am sure were points of emphasis for Aart.
First, the word “momentum” was used 6 times (by my count) during the call. Technology momentum. Customer momentum. Momentum in the company. Clearly, Synopsys is trying to portray an image of the company building up steam while the rest of the industry wallows in the recession.
Second, customers are “de-risking their supplier relationships”, i.e. looking to consolidate with an EDA vendor with strong financials who’ll still be there when the recession ends. Again, Synopsys is trying to portray itself as the safe choice for customers, hoping to woo customers away from less financially secure competitors like Cadence and Magma. This ties in with the flurry of “primary EDA vendor” relationships that Synopsys has announced recently.
The opportunity for Synopsys (and danger for the competition) is to pick up market share during this downturn and it looks like that may be happening as companies “de-risk” by going with the company with the “momentum” and a “extraordinarily strong position”. Or at least that’s the message that Synopsys is sending.
Aart did rattle off the usual laundry list of technology that he wanted to highlight, including some introduced last year (e.g. Z-route). Of note were the following:
- Multi-core technology in VCS with 2x speedup (is 2x a lot?)
- Custom Designer, which Aart called “a viable alternative to the incumbent” (ya know marketing didn’t pick the word “viable”)
- Analog IP via the MIPS Analog Business Group acquisition, especially highlighting how that complements the Custom Designer product (do I see “design kits” in the future?)
- The Lynx Design System (see my 5-part series)
- IC-Validator (smells like DRC fixing in IC Compiler - Webinar today, I’ll find out more)
In summary, Synopsys had a good quarter, but they have finally acknowledged that they are not immune to the downturn and they expect to get impacted the next few quarters.
harry the ASIC guy