People August 1, 2005
Quote of the Week … "Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes." Benjamin Franklin ***************************************** Taking it to The Street … Lots of drama for EDA on The Street last week as various companies announced their quarterly earnings. Magma was bold, Cadence was bolder, and Mentor was meticulously self-effacing. The market responded in a predictable way: For the week, Magma stock was up 2%, Cadence stock was up 11%, and Mentor went down 14% … ouch. No matter what you think about these companies – the leadership, levels of hubris, legal battles, degree of innovation in the tools, affability metric – or lack thereof, business strategies, product mix, or quality of customer support – the numbers on the ticker have a distinct and qualitative impact on the sensibilities surrounding each enterprise. In an attempt to articulate those sensibilities, the staff of EDA Confidential announces the following awards. The voting was subjective and based, in the main, on the tenor of last week's webcasts for each company. Please note, the results are subject to a 4% margin of error. * The Best Buzz of the Week Award ...Cadence Design Systems * The Pluckiest Player of the Week Award ...Magma Design Automation * The "We Don't Care How You Phrase The Question We're Not Going To Overstate Our 2005 Or 2006 Guidance Even If We Do Have Unshakable Confidence In Our Technology And The Loyalty Of Our Customers And The Long Term Play Of Our Tools Across A Range Of Markets" Award ...Mentor Graphics
July 27, 2005 Cadence Design Systems, Inc. reported second quarter, 2005 revenue of $321 million, an increase of 12 percent over the $287 million reported for the same period last year. On a GAAP basis, Cadence recognized net income of $0.5 million, or $0.00 per share in the second quarter of 2005, compared to $4 million, or $0.01 per share, in the same period last year. Using a non-GAAP measure, net income in the second quarter 2005 was $53 million, or $0.17 per share on a fully diluted basis as compared to $42 million, or $0.14 per share on a fully diluted basis, in the same period last year. For the third quarter of 2005, the company expects total revenue in the range of $320 million to $330 million. Third quarter GAAP earnings per fully diluted share are expected to be in the range of $0.05 to $0.07. Diluted earnings per share using the non-GAAP measure defined below are expected to be in the range of $0.18 to $0.20. For the full year 2005, the company expects total revenue in the range of $1.275 billion to $1.315 billion. On a GAAP basis, net income per fully diluted share for fiscal 2005 is expected in the range of $0.21 to $0.27. Using the non-GAAP measure defined below, fully diluted earnings per share for fiscal 2005 are expected to be in the range of $0.75 to $0.81. Mike Fister, Cadence President and CEO, is quoted in the Press Release: "We saw good growth in both our global accounts and geographic regions during the second quarter, confirming for us that both our technologies and our strategies are well positioned to help all types of customers meet their market demands," said Mike Fister, president and CEO of Cadence Design Systems, Inc. "We are looking forward to CDNLive!, our new expanded user group meeting in September, where we will share more about our new technology and products with our customers." Best of Show from Cadence webcast "I like our chances in synthesis." *************** July 28, 2005 Magma Design Automation Inc. announced revenue of $38.8 million for its 2006 fiscal first quarter, ended July 3, 2005, an increase of 8 percent over the $36.0 million reported for the year-ago first quarter ended June 30, 2004. In accordance with generally accepted accounting principles (GAAP), Magma reported a net loss of $(23,000), or $(0.00) per share (basic and diluted), for the quarter, compared to a net loss of $(2.5) million, or $(0.08) per share (basic and diluted), for the year-ago first quarter. For Magma's fiscal 2006 second quarter, ending Oct. 2, 2005, the company expects total revenue in the range of $37 million to $41 million. Non-GAAP earning per share (EPS) is expected to be in the range of $0.08 to $0.12, and GAAP net loss per share is expected to be in the range of $(0.13) to $(0.17). Rajeev Madhavan, Magma Chairman & CEO, is quoted in the Press Release: "It was a good quarter for Magma – all key financial metrics finished in the high end of our target ranges and we completed the rollout of the new products developed as a part of our Cobra initiative. Early feedback from users of our latest products have been very positive. I'm very pleased with our execution in the first quarter in terms of both financial performance and product delivery." Best of Show from Magma webcast … "Market penetration is not a problem for us." *************** July 29, 2005 Mentor Graphics Corp. released revised 2005 guidance and preliminary 2006 outlook. For the third quarter, Mentor expects revenue of approximately $160 million to $165 million, and pro forma earnings per share between a loss of $.05 and break-even, with GAAP earnings per share expected to be a loss of between $.07 and $.02. In the fourth quarter, the company expects strength to return with revenue of $221 million and pro forma earnings per share of approximately $.50 and GAAP earnings per share of $.26. For the full year 2005, the company expects revenue of about $700 million to $705 million. Pro forma earnings are anticipated to range between $.37 and $.42 and GAAP earnings are expected to range between $.05 and $.10. For 2006, revenue is expected to be about $755 million, a growth of approximately 7% to 8% from 2005, and pro forma earnings per share are expected to grow about 25% to $.50. GAAP earnings per share for 2006 are expected to be about $.30. Gregory Hinckley, Mentor President, is quoted in the Press Release: "Weaker second quarter bookings will not support our previously guided second half revenue targets. As a result, we are lowering our second half numbers, but remain optimistic about potential fourth quarter business. With a healthy number of contract renewals in the fourth quarter, we expect a rebound that should produce good earnings and allow us to grow our backlog." Best of Show from Mentor webcast … "Customers will run a benchmark and use it in negotiations, but I do no anticipate that anyone will replace Calibre in any substantial way with any competitive product." ***************************************** Additional financial news … ** Apache Design Solutions announced that the company is coming off of a "record breaking quarter, while remaining cash-flow positive. Q2 sales included the company’s first multi-million dollar per year, multi-year deal from a major semiconductor company. Contribution to the record quarter came from renewals and expansions within the existing customer base, as well as from new customers including Apache’s first Korean customer. Seven of the top 10 semiconductor companies worldwide have now adopted the RedHawk dynamic power signoff solution. In addition, Apache introduced and sold the first licenses of PsiWinder in Q2; PsiWinder is a new timing sign-off solution that concurrently analyzes the impact of both power and crosstalk noise on clock trees and critical paths." Nice.
Second quarter ended 30 June 2005 show total revenues in Q2 2005 at £57.8 million, up from £55.0 million in Q1 2005. Total dollar revenues* in Q2 2005 at $105.5 million, were up 21% on the aggregate revenues of $87.3 million reported by ARM and Artisan as independent companies in Q2 2004. The acquisition of Artisan was completed on 23 December 2004 At $81.9 million, dollar revenues from the original ARM business were 25% ahead of Q2 2004. Licensing and royalty revenues were up in dollar terms at 28% and 26% respectively on Q2 2004. 20 licenses for microprocessor cores were signed in the quarter. Average royalty rate at 8.5 cents, up from 8.1 cents in Q1 2005 and 8.0 cents in Q4 2004 At $23.6 million, dollar revenues from the Physical Intellectual Property Division (PIPD), the former Artisan business, was up 7% on Q2 2004. Licensing revenues of $17.9 million at record levels and 26% up on Q2 2004. PIPD royalty revenues at $5.7 million, down $2.1 million sequentially due primarily to lower catch-up royalties in Q2 2005 and lower foundry utilization levels in calendar Q1 2005 Guidance for full year 2005 dollar revenue growth was revised to 15-20%. Expectation for full year 2005 sterling revenues and profits unchanged Warren East, ARM CEO, is quoted in the Press Release: "We are pleased to report 22% growth in dollar revenues across our business in the first half of 2005. Strong licensing activity in Q2, both in the traditional ARM® microprocessor business and in the Physical IP business, gives us increased confidence in the potential for sustained growth in royalty revenues into the future."
George Thomas, Chartered Senior Vice President & CFO, is quoted: "Chartered revenues in second quarter 2005 were up seven percent and revenues including our share of SMP were up 12 percent sequentially. As we had anticipated, we saw strength in the communications and computer sectors, partially offset by weakness in the consumer sector," said "We are pleased that Fab 7, our first 300-millimeter wafer fabrication facility, started commercial shipment in June 2005, instead of July as we had anticipated earlier."
Revenue for the quarter ended June 30, 2005 was $15.2 million, a 7 percent increase from revenue of $14.2 million for the quarter ended June 30, 2004 and a 4 percent sequential increase from revenue of $14.6 million for the quarter ended March 31, 2005. On a generally accepted accounting principles (GAAP) basis, net income was $921,000, or $0.03 per diluted share, for the quarter ended June 30, 2005, as compared to GAAP net income of $469,000, or $0.02 per diluted share, for the quarter ended June 30, 2004, and GAAP net income of $515,000, or $0.02 per diluted share, for the quarter ended March 31, 2005. Revenue for the third quarter of 2005 is expected to be approximately $15.8 million; GAAP and pro forma net income per fully diluted share for the third quarter of 2005 are expected to be approximately $0.05 and $0.06, respectively. Revenue for 2005 is expected to be approximately $62 to $63 million, an increase from prior guidance; GAAP and pro forma net income per fully diluted share for 2005 are expected to be approximately $0.19 and $0.22, respectively, an increase from prior guidance. Gary Meyers, President and CEO, is quoted in the Press Release: "In the second quarter, we continued to grow revenues and profits. In the FPGA line of business we had strong sequential and year over year bookings growth of the Synplify Pro and Identify product lines. We also had more than 100 percent year over year bookings growth for the structured ASIC product line and sold a record number of structured ASIC licenses. As we look to the remainder of 2005, we are focused on continuing to drive growth and profitability." ***************************************** On the M&A front … Agilent Technologies Inc. announced it has signed a definitive agreement for Agilent to acquire "substantially all of the assets and business" of Eagleware-Elanix (Eagleware Corp.) The companies are not releasing the financial details, but say the transaction is "subject to standard closing conditions." Per the Press Release: "The acquisition would bring together two product portfolios with many complementary capabilities. Agilent’s EEsof division is recognized as a leader in the high-frequency EDA market, especially in high-end tools. Eagleware-Elanix is noted for products that are easy to use and for its technological leadership in tools for high-frequency design synthesis … Eagleware-Elanix, established in 1985, has thousands of customers worldwide. The company expects most of its employees to join Agilent’s EEsof division. " Todd Cutler, Eagleware-Elanix President and CEO, is quoted: "Joining forces with Agilent EEsof gives our mutual customers more choices. It also gives them access to Agilent’s strong, global infrastructure." Jim McGillivary, Vice President and General Manager of Agilent’s EEsof EDA division, is quoted: "Adding Eagleware-Elanix’s product line to our portfolio will provide customers with a broader range of products and services for high-frequency design, and a wide range of scalable solutions for customers with varied technical needs and budgets. Agilent has been in the high-frequency EDA software market for 20 years, and this strategic acquisition only strengthens our long-term commitment to that market." ***************************************** New facilities … Open-Silicon, Inc. has launched the company's first "Design Center Unit" (DCU) at a new facility in Bangalore, India. The company describes a DCU as "a revolutionary approach that Open-Silicon has developed to scale engineering teams efficiently. A DCU uses dynamic staffing of technology experts who are specialized in particular areas of silicon engineering. This ensures our customers get a repeatable, predictable and reliable design process for custom ASIC development." Satya Gupta, Open-Silicon Co-founder and Vice President of Engineering, is quoted: "The quality of experienced engineering, university programs that ensure continuous growth of VLSI talent, and local support from ASIC partners for chip design activity make India the ideal place for our silicon engineering efforts. We hope to add our next DCU, double our present work force in 2006 and tape-out 20-25 chips." ***************************************** New member on the team … SpiraTech announced that Gary Meyers, President and CEO of Synplicity has been named a non-executive member of the SpiraTech Board of Directors. Simon Calder, CEO of SpiraTech, is quoted: "No organization or group to which Gary Meyers belongs, fails to gain momentum. As we roll-out our products on a world-wide basis and relocate our corporate HQ to the U.S., Gary’s experience, intellect and energy as a board member will be instrumental in ensuring that we are able to move rapidly and correctly." ***************************************** Honoring innovation … Applied Wave Research, Inc. (AWR) announced that the company’s founder and CTO, Joseph Pekarek, was named the Microwave Theory and Techniques Symposium (MTT-S) Outstanding Young Engineer of the Year. The award was made at the annual IEEE MTT-S International Microwave Symposium Awards Banquet in June. Per the Press Release: "The award honors an outstanding, young MTT-S member under the age of 39 who has been distinguished through technical achievement(s) and/or exemplary service to the MTT-S. Dr. Pekarek was recognized for his innovation in software design and his outstanding achievement in entrepreneurship." Joseph Pekarek is quoted in the Press Release: "I was working on the development of advanced MMICs at Hughes Aircraft in the early 1990s and was frustrated by the inadequacy of many of the leading, high-frequency EDA tools available at the time. In 1994, I decided to go back to school to earn my Ph.D. at UCLA and simultaneously launched AWR with the intent of developing a completely new approach to designing high-frequency circuits." ***************************************** More partners … * Nallatech announced a partnership with NextCom, in which Nallatech becomes a Gold Partner and will provide products to NextCom. Meanwhile, NextCom announced it is, in turn, joining Nallatech's Channel Partner Program.Robert Labadini, President of NextCom, is quoted: "This partnership with Nallatech brings out the best in both companies to benefit our customers. We are looking forward to being able to provide the enhanced performance of FPGA technology to our mobile computing customers in the military, seismic exploration, and medical industries." * Nallatech also announced that Third Wave Solutions is joining Nallatech's Channel Partner Program. The companies say that Third Wave will represent the Mid-Atlantic region including Washington, D.C., Maryland, Virginia and eastern West Virginia, and will sell Nallatech's productss in these areas, concentrating on the military, government and communications industries.Ed Hennessy, Vice President of North American Operations for Nallatech, is quoted: "The military, government and communications industries are fast recognizing the cost, space and power consumption advantages that FPGA computing from Nallatech provides. This partnership with Third Wave will strengthen our presence in and improve our service to these crucial areas in the Mid-Atlantic region." ***************************************** Rising registrations … Giga Scale Integration Corp. (Giga Scale IC) announced that 2000+ engineers and architects have registered at ChipEstimate.com to download the InCyte chip estimation tool. The ChipEstimate.com site was launched 5+ months ago "to provides the IC design community with easy, rapid access to InCyte. … The no-cost version of InCyte currently available at ChipEstimate.com may be upgraded to include chip estimations specific to individual foundries and IP vendors' datasets." Adam Traidman, President of Giga Scale, is quoted: "With dozens of users continuing to register daily, and thousands of designs estimated to date, the InCyte community is growing by leaps and bounds. We are confident in interpreting this strong and sustained interest as proof of the need for chip estimation and architectural analysis software for the electronics design community." ***************************************** Synopsys channels Ben Franklin: June 16, 2005 In our Quarterly Report on Form 10-Q for the quarter ended April 30, 2005 filed with the Commission on June 2, 2005, we disclosed that we had received a Notice of Proposed Adjustment from the Internal Revenue Service (IRS) on May 31, 2005 asserting a very large net increase to our U.S. taxable income arising from the audit of fiscal years 2000 and 2001. We further stated that we expected to receive in due course a Revenue Agent's Report (RAR) from the IRS claiming a significant increase in our U.S. taxes payable for fiscal 2000 and 2001 based on the proposed taxable income adjustment. On June 8, 2005, we received an RAR in which the IRS proposed to assess a net tax deficiency for fiscal years 2000 and 2001 of approximately $476.8 million, plus interest. Interest accrues on the amount of any deficiency finally determined until paid, and compounds daily at the federal underpayment rate which adjusts quarterly. A higher underpayment rate of interest may be charged as a result of the issuance of the RAR. This proposed adjustment primarily relates to transfer pricing transactions between Synopsys and a foreign subsidiary. The proposed adjustment for fiscal years 2000 and 2001 is the total amount relating to these transactions asserted under the IRS theories. We will file a timely protest to the proposed deficiency with the IRS, which will cause the matter to be referred to the Appeals Office of the IRS. Resolution of this matter could take a considerable time, possibly multiple years. We strongly believe the proposed IRS adjustments and resulting proposed deficiency are inconsistent with applicable tax laws, and that we thus have meritorious defenses to these proposals. Accordingly, we will continue to challenge these proposed adjustments vigorously. While we believe the IRS' asserted adjustments are not supported by applicable law, we believe it is probable the Company will be required to make additional payments in order to resolve this matter. However, because we are in the initial stages of the Appeals process, we cannot currently reasonably estimate the amount of any such additional payments. If we are required to pay a significant amount of additional U.S. taxes and applicable interest in excess of the Company's provision for this matter, our results of operations and financial condition could be materially and adversely affected. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Rex S. Jackson
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