August 23, 2004 
 
EDA Industry Update August 2004 -- 
What did the Last Quarter/Year Bring? 

 
In May 2003, August 2003, December 2003, February 2004 and May 2004
EDA Commentaries by the authors (published on EDACafe.com), the
then-current yearly and quarterly financial performances of a
selected group of publicly traded Electronic Design Automation (EDA)
companies were analyzed and compared. Expectations regarding the
future financial performances of these same EDA entities were
documented as well. This August 2004 report covers their
performances for the second quarter of 2004.

How did the EDA Vendors fair during the first quarter of 2004?   

Table 1 Nine Public EDA Companies' Latest Quarterly Revenue Performances

The combined performance of the nine EDA vendors was up a modest
3.5% year-over-year and 2.2% sequentially. Compared to the same
quarter last year Magma, Nassda and Altium were big winners with
58%, 46% and 36% growth respectively. Ansoft, Synplicity and
Verisity also managed double digit growth. Synopsys was the only
decliner with a drop of 6.2%. On a sequential basis Altium and
Verisity stood out with 33% and 24% increases respectively. Nassda
also hit double digit growth. Ansoft at -29% and Cadence at -4.4%
were the only decliners.

Figure 1 EDA Vendor Relative Size
(based upon 2Q Revenues)

On a market share basis Cadence barely beat out Synopsys for the top
spot. The top three vendors accounted for 88% of total revenue.
 

Table 2 Eight Public EDA Companies' Latest Quarterly Earnings Performances

Combined net income for the nine EDA vendors of $9.4 million was
down 80% (-$40.6 million) year-over-year and down 66% (-$18.6
million) relative to last quarter. This is due mostly to Mentor
Graphics. Mentor's net income dropped $37 million from the same
quarter a year ago and $35 million from last quarter due to a
principally to a tax on a dividend paid by its Irish subsidiary to
the parent corporation. If Mentor's results are removed from the
total figures, the remaining eight companies had earnings of $42
million, down only 3.7% year-over-year and up 63% from the prior
quarter. Cadence was the only firm with significant growth (+$9.1
million) relative to last year. Synopsys was the second largest
decliner in absolute numbers with a drop of $6.7 million. On a
sequentially basis Synopsys was the leader with a gain of $13
million followed by Cadence with a gain of $12.5 million reversing
prior losing periods. Note that in the prior quarter Synopsys
recorded a $10 million charge related to the termination of the
MoSys acquisition

Company by Company Q2 2004 details:

On July 13th Altium Limited announced preliminary results for its
fourth fiscal quarter ending June 30th. Total revenue was AU$12.8
million or about US$10.4 million. On a product by product basis,
compared to the previous financial year, Protel sales were up, P-CAD
sales were down, and with the exception of the reduction of a
long-term service contract TASKING sales were flat.

"June was a record month for sales in real dollar terms in North
America, Europe and Australia," said Kayvan Oboudiyat, Joint CEO,
Altium. "There was a 28% increase in sales booked in the second half
of the financial year as compared to the first half. We are also
pleased by the early results of sales from our new Nexar products
seen in the three months to June, but we still expect that Nexar
sales will take 12-18 months from its initial release (in February
2004) before material contribution to Altium sales revenue is
realized."

Analyzing Altium's financial performance is difficult since only a
small fraction of revenue is generated in Australia. The impact of
currency exchange rates is considerable. Altium's last report gave
the total in AUD$ and geographic breakdown for the quarter and year
in various local currencies. Previous quarterly reports during the
fiscal year gave YTD numbers in both local and Australian
currencies. By my calculations quarterly revenue was up in AUD$
10.8% year over year and 72% over the prior quarter consistent with
Altium's usual high fourth fiscal quarter. In local currencies US
based revenue (43% of total) was up almost 9% year-over-year and 66%
sequentially. European revenue (26% of total) in Euros was down 7.7%
year-over-year but up three fold sequentially. No earnings numbers
were given.

On August 18th Ansoft Corporation announced the results for its
first quarter of fiscal 2005. Total revenue was $12.7 million, an
increase of 19% compared to $10.7 million reported in the previous
fiscal year's first quarter but an almost 29% decrease sequentially.
There was a 49% drop in license revenue relative to the previous
quarter mark of $12 million, although service and other revenue was
up 14%. Net income for the first quarter was $30,000 as compared to
a net loss of $1.2 million last year but down considerably from $2.8
million net income last quarter.

"Ansoft had a very successful first quarter," stated Nicholas
Csendes, President and CEO. "With the continued high level of
activity we are experiencing worldwide, we expect to see good
revenue growth and profitability for the balance of the year."

On July 21st Cadence Design System reported its results for the
second quarter. Total revenue was $287 million up 3.8% compared to
$277 million in the same period last year and up 8% from the prior
quarter. Product revenue of $165 million was up 2.8% and 6.8%
respectively. Maintenance revenue of $84 million was up 4.4% and
7.5% respectively. Service revenue $37 million was up 15% and 7%
respectively. Design for Manufacturing grew 62% and Services grew
53% sequentially. However, Digital IC Design was down 9.2%.

Net income for the quarter was $3.8 million up dramatically from
loss of $8.8 million the previous quarter and loss of $5.3 million
last year. Non-GAAP earnings in the second quarter were $42 million,
as compared to $29 million in the same period last year.

During the quarter Cadence released Encounter 4.1 and First
Encounter Global Physical Synthesis (GPS), a second-generation
global physical synthesis solution. The company also introduced
NanoRoute with super-threaded route acceleration. A partnership was
created with ASML to develop advanced resolution enhancement, or
RET, solutions that operate seamlessly with Cadence custom design
flows. Cadence also signed an agreement with Rambus, which will
provide customers with first-time access to serial-link IP and
design services from a single source.

"We had solid financial results demonstrated by growth in the second
quarter and we delivered innovative new technology," said Mike
Fister, Cadence President and CEO. "Through collaboration and
innovation, we have continued to help our customers address their
most important design and manufacturing challenges."

On July 28th Magma Design Automation, Inc. reported results for its
first quarter in fiscal 2004 ending June 30th. Total revenue was $36
million at the high end of its forecast, a 58% increase over the
prior year and a 6% increase sequentially. Net income for the
quarter was a loss of $2.5 million compared to a net gain of $73
thousand the prior year and a net gain of $4.4 million the prior
quarter. On a pro forma basis net income was $7.7 million versus
$4.9 million a year ago and $7.1 million a month ago. Expenses for
the quarter included a $4.0 million in-process research and
development charge related to Magma's acquisition of Mojave Inc., a
$502 thousand charge for restructuring and $458 thousand for
amortization of stock based compensation. In the corresponding
period last year there was a $4 million charge for amortization of
stock based compensation.

"The quarter just concluded continued Magma's growth trends," said
Rajeev Madhavan, Magma chairman and CEO. "It was the seventh
consecutive quarter of increasing revenue as we had solid financial
performance. We continue to work with designers addressing critical
challenges in today's most aggressive chip designs."

On Jul 22nd Mentor Graphics announced its results for the second
quarter. Total revenue for the quarter was $169 million up 3.2%
sequentially and almost 8% year-over-year. System and software
revenue, 58% of the total grew faster than service and support
revenue, 42% of the total, particularly with respect to the same
period last year. Revenue by region was 50% Americas, 25% Europe,
15% Japan, and 10% Pacific Rim. Japan was particularly robust. Net
income was a loss of $33 million a severe reversal from the $2.2
million in the prior quarter and the $4 million a year earlier.
However, GAAP taxes for the quarter were $38 million, $36.6 million
of which was a charge arising from a one-time dividend declared by
the company's Irish subsidiary to the US parent company in the
amount of $120 million.

During the quarter, Mentor launched its CatapultC Synthesis product
at the Design Automation Conference (DAC). Mentor also recently
introduced the I/O Designer tool, a new product that facilitates
concurrent chip-to-board design of field-programmable gate arrays
(FPGAs) and the PCB, as the number of pins on the FPGA grows.

"While the overall electronic design automation business climate
remains challenging, Mentor's strength in products for new design
methodologies continues to fuel growth," said Walden C. Rhines,
chairman and CEO, Mentor Graphics. "Examples include Calibre
resolution enhancement technology, automotive cabling,
analog/mixed-signal design and new printed circuit board (PCB)
design tools. We also had seven product families that set bookings
records for the second quarter."

"By region, Japan clearly is leading Mentor's overall growth, with
new strength there in PCB design tools," said Gregory K. Hinckley,
president, Mentor Graphics. "Despite weakness in our new and
emerging product category, we saw important areas of strength. Our
cabling business, for instance, won two contracts directly with
automobile manufacturers this quarter, a critical milestone for the
business and an indication of its growing momentum."

"Mentor's focus on new design methodologies is sustaining the
company's growth, even in the mixed business environment we continue
to experience," said Rhines.

On July 14th Nassda Corporation announced its results for the second
quarter. Revenue for the quarter was $11 million a 12% sequential
increase and a whopping 46% increase over the same period last year.
Subscriptions accounted for 53% of revenue, maintenance 23% and
product licensing 24%.

Net income for the quarter was $1.1 million up $315K or 42%
sequentially and up $870K or 443% year-over-year.

"We are very excited to have achieved our highest level of revenue
and met our earnings target. In addition, our cash, cash equivalents
and short-term investments increased by approximately $3.7 million
during the quarter and totaled $99.9 million as of June 30, 2004,"
said Sang Wang, Chief Executive Officer. "On the product development
front, we also released our new HSIMplus platform during the quarter
and now offer a suite of options to help address the major stumbling
blocks to the success of large and complex IC designs at 130
nanometer and below, such as reliability of power and signal
networks, the timing impact of dynamic voltage drop and the effects
of crosstalk noise."

On August 2nd Synopsys announced preliminary results for the second
quarter. The Company expects total revenues to be $279 million to
$283 million, compared to its previous target range of $300 to $320
million. The Company expects GAAP earnings per share to be $0.15 to
$0.19, compared to its previous target range of $0.20 to $0.25, and
non-GAAP earnings per share to be $0.31 to $0.34, compared to its
previous target range of $0.35 to $0.40.

On August 18th Synopsys formally announced its results for the
second quarter. Total revenue for the quarter was $281.7 million, a
6.2% decrease compared to revenue of $300.4 million for the third
quarter of fiscal 2003 and a 4.4% drop sequentially. On a product
segment basis Gallaxy (60% of total) declined almost 12%
year-over-year and Discovery (21% of total) declined just 1.2%. On a
positive note smaller segments such as Design for Manufacturing
(7.2%) grew 43% and Service (4%) grew 9.6%. On geographic basis
North America (56% of total) declined 12%, Europe (16%) dipped 5.1%
while Japan (16%) grew 14.8%. On a sequential basis Gallaxy declined
9% while Discovery increased 1.2%. Also Japan and AP each declined
around 20%, while North America grew 1.4%.

Synopsys net income for the quarter was $41.8 million down almost
14% compared to net income of $48.5 million for the third quarter of
fiscal 2003 and up 46% from the $28.7 million in the previous
quarter. On a non-GAAP basis, net income was $53.2 million, compared
to $66.9 million last year and $57.1 million last quarter.

"Clearly, our third quarter was tough, mainly due to
lower-than-expected bookings for upfront licenses, with several
contracts being pushed out very late in the quarter," said Aart de
Geus, chairman and chief executive officer. "In July, customers
became markedly more cautious about extending existing commitments
and spending cash, particularly impacting our upfront bookings,
which under our model require front-loaded payment terms. Recent
announcements in the industry of lower earnings and reduced
forecasts suggest continued caution on customer spending. This
caution, and the fact that we anticipate 2005 will be a relatively
low renewal year for Synopsys, will reduce our bookings expectations
for fiscal 2005."

"Against this backdrop, with new technology rolling out this year
and accelerating in 2005, and with the advantage of a strong
existing backlog, we have decided to move Synopsys immediately
towards a maximally subscription-based license model," continued Dr.
de Geus.

CFO Steve Shevick added "The brief explanation of why we fell short
is that we did not book and ship our forecasted level of upfront
licenses during the quarter. Though the pipeline was sufficient, too
many opportunities fell out late in the quarter. Many opportunities
fell out due to our payment terms requirements. As I have explained
in past quarters, in order for us to recognize revenue upfront the
customer must pay 75 percent of the license amount plus the first
year's maintenance within one year of shipment. This is the most
stringent standard applied by the major EDA vendors. As Q3
developed, customers became less willing to agree to these terms."

During the quarterly analyst call Aart de Geus touted the benefits
of this new strategy as preserving pricing on their technology,
being more attractive to customers than up-front payment
alternatives, enabling a better matching of products and services to
current customer needs and providing greater visibility to revenue
while decreasing end-of-quarter uncertainty. He also pointed out
that Synopsys will be in the low part of its renewal cycle for the
next five quarters with their global and strategic accounts, which
make up two thirds of their business.

Note: Synopsys shares fell more than 28 percent in after-hours
trading. Analyst on the call hammered away at why the shortfall was
not recognized earlier. One analyst commented "This is now a show me
story that lacks catalysts, and suffers from a loss of management
credibility." Another said "the company revealed in stunning detail
the fact that it is as susceptible to the vagaries of the
semiconductor cycle as its customer base."

On July 21st Synplicity, Inc. announced financial results for the
quarter ended June 30, 2004. Revenue for the quarter was $14.2
million, a 16 percent increase from revenue of $12.2 million for the
quarter ended June 30, 2003 and a five percent sequential increase
from revenue of $13.5 million the prior quarter.

Net income for the second quarter was $469,000 compared to a net
loss of $599 last year and a net profit of $296 last quarter.

"Our strategy to expand our market opportunities continues to pay
off for us, and I am proud that we exceeded both our revenue and
earnings guidance for the quarter," said Bernard Aronson, President
and CEO of Synplicity. "Bookings for our ASIC synthesis products
grew 60% over the same period last year, led by multiple license
sales with major customers. Overall bookings for our ASIC products
represented 24% of total product bookings, and we believe we
continued to maintain our leadership position in the FPGA synthesis
marketplace. In addition, year-to-date bookings from time-based and
multi-year arrangements as a percent of total bookings grew to 25%
from 16% for the same period last year. Though these bookings do not
fully contribute to revenue immediately, they are a source of
recurring revenue and help increase our revenue visibility," Aronson
concluded.

On July 26th Verisity Ltd. announced its results for the second
quarter. Total revenue was $13.7 million, a 10% increase from
revenue of $12.5 million for the same quarter in 2003, and a 24%
increase from revenue of $11 million for the prior quarter. Net
income was a loss of $2.5 million compared to net gain of $2.2
million last year and a net loss of $2.2 million last quarter.

In May Verisity announced a new product package specifically
targeted for high-performance chip- and system-level verification.
SpeXtreme is a direct kernel integration of Verisity's recently
announced SpeXsim and the Xtreme-II acceleration and emulation
solution acquired with the acquisition of Axis Systems. SpeXsim
combines Verisity's Specman Elite for process and testbench
automation Specman Elite with Axis' event-based, mixed-language
simulator Xsim.

"We are very pleased with our financial results for the quarter. We
built substantial backlog while growing revenue to $13.7 million.
Customers have embraced our expanded product offerings, quickly
validating our recent strategic acquisition of Axis Systems," said
Moshe Gavrielov, chief executive officer of Verisity. "We are now
able to offer customers the full complement of solutions required
for block, chip and system level verification. This has
significantly fortified our competitive position in the verification
marketplace. Our quick integration of Axis Systems allowed us to
announce our SpeXtreme solution, integrating our market leading
testbench automation solution with simulation, acceleration and
emulation. SpeXtreme targets high performance chip- and system-level
verification that will enable customers to significantly increase
their verification performance," added Gavrielov.



EDA versus MCAD

The most recent quarterly performances of nine public MCAD Vendors
will be provided in the August MCAD Commentary published on
MCADCafe. Meanwhile, how did the top three EDA companies fair
against the top three MCAD companies in 2Q 2004?
 

Table 3 Top three EDA vendors versus the top three MCAD vendors


The top three MCAD vendors continued to edge out their EDA
counterparts in terms of total revenue. The combined top three EDA
vendors grew nearly 2% compared to flat growth for the top three
MCAD vendors. MCAD earnings were 6.7% of revenue versus 1.7% for
EDA.

Note 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. End user purchases of
their products would raise the dollar figures substantially. On the
other hand, AutoDesk has significant revenue outside MCAD in AEC,
GIS and Digital Content Creation (Discreet).

The comparison of earnings across industries is more difficult.
UGS's earnings included an in-process research and development
charge of $43.7 million and about $5 million in additional
acquisition related expenses. Mentor's earnings included taxes of
$38 million, $36.6 million of which was a charge arising from a
one-time dividend declared by the company's Irish subsidiary to the
US parent company.



EDA Vendor Stock Performance 


Table 4 - Nine Public EDA Companies' Stock Prices
(Synopsys adjusted for 2:1 split September 2003)

Table 5 - Statistics of three major stock indices 

Figure 2 EDA vendor stock prices 

As a group the EDA vendor's stock prices fell 1.3% year-over-year
while the DOW and S&P indexes rose ~17% and the NASDAQ rose 26%.
Altium was the biggest percentage loser after conversion from
Australian currency. Verisity and Nassda each dropped nearly 50%.
Synopsys also fell 8.2%. Ansoft was the largest gainer at 45%,
followed by Cadence at 21% and Synplicity at 16%. The remaining
vendors trailed the major stock indexes. On a quarterly sequential
basis the EDA vendors as a group underperformed the market losing
9.1% versus very modest (less than 3%) gains for the indexes.
Altium, Verisity and Nassda were again the big decliners. Only
Ansoft experienced positive change in its stock price.

EDA Vendor Forecast 

Table 6 Quarterly Forecast for Nine public EDA Vendors
(forecast midpoints used if range has been given) 


The eight EDA vendors are forecasting a combined decrease of 2.3%
relative to the same period last year and a 3.8% drop relative to
the prior quarter. On a percentage basis Magma, Nassda and Verisity
are very bullish relative to last year but significantly more
cautious relative to last quarter. Synopsys is forecasting a major
drop both sequentially and year-over-year as "Synopsys moves
immediately towards a maximally subscription-based license model".
This will cause a significant revenue short fall as a higher
percentage of license sales become ratable. Ansoft and Verisity are
predicting 10% growth sequentially, while Nassda and Mentor are
focusing about a 1% dip.


Detailed EDA Vendor Financial Forecasts for 2Q2004

Altium did not provide any guidance.

Ansoft's guidance for upcoming quarter is for revenues of $14
million, $16 million and $19 million the next three quarters and for
earnings of $0.50 to $0.55 for fiscal 2005.This compares to $12.6
million last quarter.

For the third quarter of 2004, Cadence Design System expects total
revenue in the range of $300 million to $310 million versus $287
million this quarter and $269 million in the third quarter of 2003.
Third quarter GAAP earnings per fully diluted share are expected to
be in the range of $0.08 to $0.10. This compares to a loss of $0.06
per share in 3Q03. Diluted earnings per share using non-GAAP measure
are expected to be in the range of $0.18 to $0.20.

For the full year 2004, the company expects total revenue in the
range of $1.175 billion to $1.225 billion versus $1.11 billion for
2003. On a GAAP basis, they expect net income per fully diluted
share for fiscal 2004 in the range of $0.25 to $0.32. They expect
non-GAAP fully diluted earnings per share for fiscal 2004 to be in
the range of $0.70 to $0.77.

Magma Design Automation, Inc. expects total revenue in the range of
$35 million to $39 million for its fiscal 2005 second quarter, which
will end September 30, 2004. This compares to $36 million in the
quarter just completed. Pro forma EPS is expected to be in the range
of $0.18 to $0.22. GAAP EPS is expected to be in the range of $0.03
to $0.07. This compares to a record $0.18 pro forma net income and a
GAAP net loss of $2.5 million in the quarter just reported.

Mentor Graphics expects revenue in the third quarter to range
between $165 million and $170 million versus $169 million in the
quarter just completed and versus $151 million in 3Q03. Pro forma
earnings per share are expected to range between $.05 and $.10
versus $0.14 this quarter, while GAAP earnings per share are
expected to range between $.01 and $.06. Fourth quarter guidance
remains unchanged as does Mentor's $.80 pro forma earnings per share
forecast for the entire year. GAAP earnings per share are expected
to be $.09 for the entire year versus $0.11 for 2003.

For 2005, preliminarily Mentor expects to report pro forma earnings
of about $1.00 on revenue growth over the $675 million in 2003 in
the range of 6% to 8%. 2005 GAAP earnings per share are expected to
be $0.84 for the entire year.

Nassda Corporation expects total revenue for the next quarter to be
in the range of $10.8 million to $11.0 million versus $11 million in
the previous quarter. Nassda expects fully diluted earnings per
share of approximately $0.00 to $0.01. Due to the seasonality of
renewals, budget constraints and the market and competitive
environment, the company expects that time-based license bookings as
a percent of total bookings will be between 50% to 70% for the
fourth quarter of fiscal 2004. As a result, time-based license
revenue as a percent of total revenue is expected to be between 50%
to 60% for the fourth quarter of fiscal 2004.

Nassda expects the legal fees related to its on-going litigation
with Synopsys, Inc. to increase as the cases get closer to trial. As
a result, Nassda expects overall operating expenses to increase 10%
to 15% for the fourth quarter of fiscal 2004 as compared to the
third quarter of fiscal 2004.

For fiscal 2004, Nassda anticipates total revenue of $41.2 million
to $41.5 million and fully diluted earnings per share of
approximately $0.08 to $0.09. Total revenue for fiscal 2003 was
$35.1 million. Net income for fiscal 2003 was $3.6 million, or $0.12
per diluted share.

As its moves to a subscription-based licensing model from an upfront
licensing program Synopsys forecasts that next quarter revenue will
lie in the range of $220 million to $240 million compared to $281
million last quarter, an 18% drop, and compared to $316 million, a
27% drop, for the same period a year ago. The company anticipates
non-GAAP earnings between $0.00 and $0.04. Revenue from backlog will
amount to over 90% of revenue target.

For fiscal 2004 Synopsys expects revenue between $1.08 billion and
$1.1 billion compared to $1.18 billion in fiscal 2003. Non-GAAP
earnings for the year are anticipated to lie between $1.01 and $1.05
per share versus $1.59 in 2003.

Synopsys' orders for the year are expected to be below its previous
target of $1.4 billion. Synopsys is not providing a new total orders
target for fiscal 2004 or an updated target for upfront orders as a
percentage of product orders for the year. Both of these metrics
will be materially affected, more so than in other quarters, by the
timing of completion of certain agreements currently being
negotiated. Synopsys intends to report on its orders results for the
year when it reports its fourth quarter results.

For fiscal 2005 revenue is forecast as approximately $940 million
and non-GAAP earnings: $0.28 - $0.38 per share.

Aart de Geus, chairman and chief executive officer said "In July,
customers became markedly more cautious about extending existing
commitments and spending cash, particularly impacting our upfront
bookings, which under our model require front-loaded payment terms.
Recent announcements in the industry of lower earnings and reduced
forecasts suggest continued caution on customer spending. This
caution, and the fact that we anticipate 2005 will be a relatively
low renewal year for Synopsys, will reduce our bookings expectations
for fiscal 2005." He continued

"Against this backdrop, with new technology rolling out this year
and accelerating in 2005, and with the advantage of a strong
existing backlog, we have decided to move Synopsys immediately
towards a maximally subscription-based license model. We believe
this further transition offers the best opportunity to preserve the
value of our new technology, aggressively pursue competitive
displacements, decrease end-of-quarter uncertainty, and more
flexibly offer customers complete, differentiated solutions to match
their current needs. Moving away from upfront licenses will in the
near-term lower our fourth quarter, fiscal 2004 and fiscal 2005
revenue expectations, but we believe it is the right action to put
Synopsys on the strongest long-term footing."

Synplicity forecasts that revenue for the third quarter of 2004 is
expected to range from $14.4 million to $14.6 million, with
sequential growth from $14.2 million primarily due to higher license
revenue. GAAP operating expenses for the third quarter of 2004 are
expected to increase approximately two percent sequentially from the
second quarter of 2004.

Revenue for 2004 is expected to be at the high end of our range,
approximately $57 million compared to $49.6 million in fiscal 2003.
GAAP operating expenses for 2004 are expected to increase by
approximately 10 percent from 2003, as compared to previous guidance
of eight percent. GAAP net income per fully diluted share for 2004
is expected to be at the high end of our range, approximately $0.07.
In 2003 Synplicity had a GAAP net loss of $377,000, or $0.01 per
diluted share.

Verisity Ltd expects revenue in the third quarter of 2004 to be
approximately $15.0 to $15.3 million versus $13.7 million in the
just completed quarter. Non-GAAP loss per share is expected to be
approximately ($0.01) to ($0.02). Revenue for fiscal 2004 is
expected to be between $56 and $58 million. Non-GAAP loss per share
for fiscal 2004 is expected to be between ($0.05) and ($0.09). For
2003 revenue was $48.5 million and net income was $8.7 million, or
$0.41 per diluted share.


EDACafe.com tracks the financial performance of seventeen (17)
public companies across the broader electronics tools market, from
which we have arbitrarily selected nine (9) to represent EDA vendors
in the software & programming industry.

Taken together, three of these EDA companies (Cadence, Mentor
Graphics, and Synopsys) represent a dominant 90 percent of the total
revenue in this grouping, and each of these three companies offers a
wide array of software products and services.

The remaining six (6) EDA public companies selected - Altium,
Ansoft, Magma, Nassda, Synplicity, and Verisity - offer specialized
software/services products in specific EDA niches. Combined, they
generate the remaining 10 percent of the revenue of the nine
companies being considered here. Not infrequently, some of these six
smaller companies partner with one or more of the Big Three
(Cadence, Mentor, Synopsys) to provide end-customers with broader
solution suites. (Of course, the possibility always remains that one
or more of the smaller six could become acquisition candidates for
the Big Three as well).

The collective annual revenue of these nine selected EDA companies
worldwide is just north of $3 billion, a total which compares
favorably to the combined ~$4 billion in annual revenue created by
the eight MCAD companies covered in May 2003 and the nine MCAD
companies covered in August and November 2003. However, even the
pooled ~$7 billion in revenues of both of the selected MCAD and EDA
company groupings pales in comparison to the $150 billion spent
globally on an annual basis across all categories of software.

As with MCAD software, however, the importance of the EDA software
niche lies in the leverage it provides to users applying the tools.
EDA helps to create the electronic integrated circuits,
microprocessors, memories, boards, MCMs, computers, PDAs, cell
phones, automotive electronics and avionics, smart appliances, and
other such electronic systems now clearly omnipresent in our
everyday lives. Indeed, most of products mentioned above are
electromechanical - demanding a smooth merger of EDA and MCAD
software tools (still an objective yet to be fully realized).

Both MCAD and its slightly more youthful companion industry of EDA
are arguably responsible for enabling virtually all contemporary
design - analysis - manufacturing industries - industries which are
key to creating real productivity and national wealth in every
modern economy.

Note: Lawsuits; acquisitions of outside public & private companies;
acquisitions of intellectual property; purchases of other assets;
strategic changes in pricing and software license/lease practices;
and/or other similar events frequently affect both the reported
revenues and GAAP net income of all companies. Both EDA and MCAD
companies are no strangers to these many and varied actions. Many of
these "non-operating" company activities lead to entries "below the
Operating Income line". Often these entries -- such as "integration
costs, in-process R&D, amortization of intangible assets & deferred
comp, interest income, pro or con income tax effects, etc" - can
make large differences between pro-forma net income and GAAP net
income.

Nevertheless, these impacts, positive or negative, are almost always
the results of explicit employee actions and/or management decisions
designed to supplement organic revenue growth in revenues, in
earnings, or both. Accordingly, both the gain and the pain must be
borne, in one accounting period or another. Accordingly, total
revenues, GAAP net income and GAAP Earnings Per Share (EPS) are
universally accepted measures to analyze fairly the relative and
absolute performances of most private and public companies.

On August 2, 2004 the EDA Consortium's Market Statistics Service
(MSS) announced that the electronic design automation (EDA) industry
revenue for Q1 of 2004 was $995 million, a 6% increase over Q1 2003.
Walden C. Rhines, chairman of the EDA Consortium and chairman and
CEO of Mentor Graphics Corporation said "The growth in services and
SIP revenue is a good indicator of renewed design activity. This
should point to further tools revenue down the road."
 

Table 7 Revenue by Product Category 

The geographic distribution was

Table 8 Revenue by Geography 

According to the World Semiconductor Trade Statistics (WSTS), the
world semiconductor market reached a size of $166B in 2003. The WSTS
predicts that the year 2004 will grow 28.4% over 2003, which is a
9-percentage point improvement over the growth projections made last
autumn. For the following years, a deceleration in growth is
forecast to 8.5% growth in 2005, followed by virtually zero growth
in 2006. In 2007, another recovery cycle is expected to begin, with
market growth in the 10% range. According to the press release:

"While the forecasted semiconductor market growth cycle is smoother
than previous cycles, the different regions and products maintain
their historical patterns. That is, the memory product cycle is more
pronounced than the other products and Asia Pacific continues to be
the fastest growing region, due not only to a continuing shift in
equipment production but also to rising internal demand in those
countries. The growth of equipment production in Mainland China will
help sustain faster than average growth in Asia throughout the
forecasting period."

Table 9 Semiconductor Market by Geography 
Table 10 Semiconductor Market by Product Sectors