Commentary: EDA Industry Update June 2008 -- What did the Last Quarter Bring?

While the price of oil did close down a few percentage points on May 27, 2008, US average gas prices hit another record high at almost $3.94 a gallon of regular, according to a survey of stations by the AAA and the Oil Price Information Service. Now, enterprising thieves have added puncturing gas tanks and gas lines to steal gasoline to their previous nefarious methods of either siphoning gas, or just driving off without paying after fill ups at gas stations.

Also on May 27, The New York-based Conference Board reported that its Consumer Confidence Index dropped to 57.2, down from a revised 62.8 just last month. The May reading marks the fifth straight month of decline in US Consumer Confidence and is now lower than it was during Bush 43's first recession in 2001. In fact, it is the lowest reading since the index registered 54.6 in October 1992 - you know, 16 years ago, when the US economy and the citizenry were suffering during Bush 41's recession.

The downbeat news about Consumer Confidence arrived May 27 just as we also received apparently mixed news about the US housing market. The Standard & Poor's/Case-Shiller index released May 27 showed that US housing prices dropped during Q1 2008 at the sharpest rate (-14.1%) in two decades, indicating that the US housing slump is still worsening. This index is now at its lowest level since its 1988 inception - you know, the year Bush 41 was elected.

Meanwhile, the US Commerce Department reported May 27 that new US home sales unexpectedly rose 3.3% from March to April. It was the first increase in six months and might seem like a harbinger of happier days ahead. But perhaps the May 27 housing news isn't “mixed” after all! April's new home sales looked better mostly because of a large downward revision to the March 2008 numbers! And the median home price fell 4.2% last month. Alas, even after the slight uptick in April 2008, sales of new US homes are still at their lowest level in 17 years.

MCAD versus EDA Q1 2008

The detailed quarterly performances of a selected group of public MCAD Vendors has been provided in the authors' MCAD Commentary for May 2008 recently published on MCADCafe.

The Q1 2008 revenue from the top three MCAD vendors was $1.32 billion, a whopping 66% higher than the revenue from the top three EDA vendors. The three leading MCAD vendors all sported net earnings for the first quarter of 2008, while two of the Big 3 EDA Vendors (Cadence and Mentor Graphics) endured net losses. So in Q1 2008 at least, the Top 3 MCAD Vendors were separated by $181.1 million in earnings from the Big 3 EDA Vendors. See Table 10.

Keep in mind that Autodesk sells its products predominantly through valued added resellers and distributors. Dassault Systemes sells predominantly through IBM and its Business Partners and in some instances, notably SolidWorks, through VARs. Thus, if one were to count actual end-user purchases of MCAD products, the combined MCAD revenue total would raise the Big 3 MCAD dollar total substantially. On the other hand, Autodesk has not-insignificant revenue outside MCAD in AEC, GIS and Media/Entertainment.

Forecast Guidance from Individual EDA Providers

Altium, Ansoft and Synplicity did not provide guidance. The four firms providing guidance are forecasting an average year-over-year decline of -7.7% for the next quaarter. Magma is the most optimistic at -5%. On a sequential basis the four forecast an average 4.5% gain. Cadence is the most optimistic at almost 10% revenue growth, while Magma sees a drop of almost 8%. See Table 11.

Individual Company by Company Guidance

Altium and Ansoft did not provide guidance for the next quarter.

For the second quarter of 2008, Cadence expects total revenue in the range of $310 million to $320 million, compared to $287 million in the quarter just reported, and a decrease compared to $391 million in the second quarter last year. For the full year 2008, Cadence expects total revenue in the range of $1.490 billion to $1.540 billion compared to $1.615 billion achieved in 2007.

As guidance for Magma's fiscal 2009 first quarter, ending Aug. 3, 2008, the company expects total revenue in the range of $50.0 million to $51.5 million, compared to $55 million in the quarter just reported and compared to $53.5 in the “same” quarter last year (Magma is shifting its fiscal year by a month). Revenue for fiscal 2009 is expected to be in the range of $225 million to $230 million, representing growth in the range of 5% to 7.5% over the $214 million in fiscal 2008.

For fiscal second quarter, consistent with the previously-forecast weaker first half, Mentor Graphics expects revenue of about $173 million, compared to $179 million in the quarter just reported, and compared to $206 million in the same quarter a year ago. For fiscal year 2009, the company expects revenue of approximately $915 million, compared to $880 million in fiscal 2008.

As guidance Synopsys expects revenue in the next quarter (third quarter of fiscal 2008) to be in the range of $335 million to $343 million, compared to $324 million in the quarter just reported and compared to $304 million in the same quarter last year. This represents a growth rate of approximately 9 ½ to 10 ½ percent. Synopsys anticipates that Synplicity will contribute approximately $20-23 million. For full fiscal 2008 Synopsys expects revenue to be in the range $1.325 billion and $1.340 billion.

EDA Consortium's Market Statistics

On April 2, 2008 the EDA Consortium's Market Statistics Service (MSS) announced that the EDA industry revenue for Q4 2007 grew 6.7% to $1,602 million, versus $1,501 million in Q4 2006. The EDA Industry's growth of 6.7% in Q4 2007 easily eclipsed the US GDP, which grew only 0.6% in Q4. The four-quarter average EDA Idustry growth rate, which compares the most recent four quarters to the same four quarters in the prior year, was 9.1%.

In the fourth quarter of 2007, the CAE segment accounted for 41% of total EDA revenue, IC Design & Verification for 28%, Semiconductor IP for 17%, PCB/MCM for 10% and Services for 5%.

For the fourth quarter of 2007 North America accounted for 46% of total EDA revenue, Europe for 20%, Japan for 20% and ROW for 15%.

Robert Gardner, executive director, EDA Consortium, said, “The reported worldwide EDA industry showed continued growth in Q4 2007, with double digit growth in Japan and the Rest-of-World. Overall industry revenue increased relative to both Q4 2006 and the four quarter moving average. EDA employment has seen steady growth over the course of 2007.”


Comments? Feedback? Tell us what you think about this topic, or share any additional information you may have on the subject! Submit your comments to: EDACafe-Editor.

About the Authors:

Since 1996, Dr. Russ Henke has been president of HENKE ASSOCIATES, a San Francisco Bay Area high-tech business & management consulting firm. The number of client companies for Henke Associates now numbers more than forty. During his corporate career, Henke operated sequentially on "both sides" of MCAD and EDA, as a user and as a vendor. He's a veteran corporate executive from Cincinnati Milacron, SDRC, Schlumberger Applicon, Gould Electronics, ATP, and Mentor Graphics. Henke is a Fellow of the Society of Manufacturing Engineers (SME) and served on the SME International Board of Directors. He is also a member of the IEEE and a Life Fellow of ASME International. In April 2006, Dr. Henke received the 2006 Lifetime Achievement Award from The CAD Society, presented by CAD Society president Jeff Rowe at COFES2006 in Scottsdale, AZ. In February 2007, Henke became affiliated with Cyon Research's select group of experts on business and technology issues as a Senior Analyst. This Cyon Research connection aids and supplements Henke's ongoing, independent consulting practice (Henke Associates).

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Review Article
  • October 09, 2008
    Reviewed by 'Wieslaw Paprocki'
    Something went wrong with:
    "As shown in Table 1, the combined revenue performance of seven EDA vendors was $911 million, a double-digit increase of 10.7% from the $956 million in the year ago quarter,".
    As far as I understand the maths this is rather 5% DECREASE....
    Wieslaw Paprocki
    Alt-S, France

      Was this review helpful to you?   (Report this review as inappropriate)

  • October 09, 2008
    Reviewed by 'Wieslaw'
    Logic Vision???("...Logic Vision [WP:should be Magma] and Synopsys also had significant declines at 20% and 15%, respectively.")

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  • October 09, 2008
    Reviewed by 'Russ Henke & Jack Horgan'
    The EDA Commentary authors wish to thank Mr. Weislaw Paprocki of Alt-S France for catching the two data and text errors on 29 July 2008, and we have corrected them as of 07 August in the currently-posted Q1 2008 EDA Industry Commentary.

      Was this review helpful to you?   (Report this review as inappropriate)

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