Posts Tagged ‘Orion’

Turbulence

Tuesday, August 26th, 2008

That’s the word Aart DeGeus invoked no less than 7 times to describe the business environment during Synopsys’ Q3 analyst call last week. “Some companies may do particularly well and others poorly … and the same is true in of course our market.”

Indeed, the EDA market is turbulent and there will be winners and losers.  With Mentor and Synopsys announcing earnings last Wednesday, we got a chance to peer ahead and see which skipper could steer his ship through the turbulent waters.

Mentor Graphics

Under cloak of darkness, before the sun rose in Wilsonville and before the market opened on Wall Street, Mentor announced Q2 revenue of $182.4M, exceeding Street expectations of $175M. Even though their core EDA business declined by 10% last quarter, they more than made up for it by quadrupling their business in the vertical automotive market from 5% to 20% of revenue. Mentor admits that this kind of jump is a one quarter fluke, still it looks like Mentor’s focus in this area and a developing focus in aerospace are paying off.

Mentor cited uncertainties in the economy as affecting current and future commitments. One interesting datapoint … for every $1.0M contract that was renewed last quarter, Mentor received $1.06M compared to $1.25M - $1.40M they had seen consistently in the past. This could be an aberration or it could signal that customers are reluctant to make larger or longer term commitments. As a result, Mentor has reduced expenses by cutting 150 jobs so far this year, closing offices, limiting travel and trade show participation, and even deferring replacement of PCs.

Looking forward, Mentor seem to be banking on two strategies. First is their vertical market focus in automotive and aerospace. Second, Mentor is positioning the transition to 45nm as an inflection point and an opportunity to replace existing physical design tools with their Olympus SoC solution, particularly emphasizing the need to handle multi-mode multi-corner design.

Lastly, their was no direct comment concerning the now defunct Cadence acquisition attempt. However, apparently Mentor was able to enact a golden parachute for its executives in case of takeover. They also spent and will continue to spend ~ $1M per quarter on “banking fees” associated with the Cadence offer and possibly looking at other ways to “structure” their business. Nudge, Nudge, Wink, Wink.

Mentor shares closed up 10% Wednesday.

Synopsys

In contract to Mentor, Synopsys announced it’s earning in full daylight and after the markets closed for the day. Q3 revenue was $344M compared to the market’s expectations of $340M, a healthy increase of 13% from last year. Unlike the automotive business carrying Mentor for the quarter, there was no single area that stood out for Synopsys. They signed a significant deal with National Semiconductor that includes access to Synopsys’ analog/mixed-signal and custom IC design tools (code named Orion), now in beta and scheduled for release this quarter.

As far as the turbulent environment is concerned, Synopsys is seeing mixed signals with “some customers racing forward to gain market share while others are holding back on their forward commitments”. Aart noted that in “sales situations that are heading towards closure you suddenly get two, three, four weeks more signature loops … that says typically that the approval is going up one or two levels in a company or that everything goes through the desk of the CFO”. Synopsys expects to benefit from this uncertainty as customers opt for safety, both technologically and financially. Still, they scaled back expectations for revenue growth to 6-7% in 2009.

There were also some interesting product notes. As I mentioned above, Synopsys will complete beta testing and formally introduce its AMS design tool, codenamed Orion, this quarter. Orion will plug a critical portfolio hole so that Synopsys can be a viable choice for key customers looking to consolidate all digital and analog design with a single vendor. On the place and route front, Synopsys claimed a production tapeout for their new Zroute router which implements diagonal routing and also runs multithreaded and faster than their current router.

Synopsys shares closed down 11% Thursday. Apparently, the fact that Synopsys lowered its cash flow forecast for 2009 from $325M to $320M-$325M spooked Terence Whalen of Citibank so much that he changed his recommendation for Synopsys from Buy to Sell. Hard to fathom, considering the slight amount of this change, considering that 2009 is still being planned by Synopsys, and considering Synopsys’ history of generating cash from operations.  Still, it does not take much these days I guess.

Last week, I said that I would be watching for 4 things.  So, what did I see?

  1. The market uncertainty that Cadence noted is definitely affecting Mentor and Synopsys as well, so it is an industry problem, not just a Cadence problem.The waters are turbulent.
  2. Little said about the Cadence acquisition.
  3. Synopsys may be seeing some benefits from the uncertainly caused by the short-lived Cadence - Mentor courtship. Still, too early to tell.
  4. Very little on the Synplicity acquisition except that things are going well.

For some more insight, see Gabe Moretti’s articles on Mentor and Synopsys and Sramana Mitra’s analysis.
harry the ASIC guy

Hot Topics from SNUG San Jose 2008 - Day 1 AM

Monday, March 31st, 2008

I just attended Aart DeGeus’ keynote address at SNUG 2008 and there were two highlights:

  1. Synopsys is back in the analog design market! Filling the gap in their product portfolio, they announced a new in-house developed product called Orion that is aiming directly at the Cadence users of Virtuoso. Orion is in beta right now and will work with Open Access. They did a canned demo and highlighted ease-of-use and productivity over Virtuoso.
  2. Besides questions on Orion, all the other questions were regarding VMM / OVM and the path to getting a truly open standard verification methodology. Cliff Cummings and John Cooley asked the most direct questions on this topic, such as:
  • Will VMM ever be truly open and not just licensed?
  • Is there any attempt to speak directly to Mentor and Cadence to try to combine OVM and VMM?
  • Can we use VMM with another System Verilog simulator?

Synopsys’ plan is to donate VMM to Accellera and have Accellera drive a standard verification methodology. When asked about working with Mentor/Cadence, Synopsys asked the designers to try to push them to the table within Accellera. I expect this battle will continue.

More later…. harry the ASIC guy