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Cadence Design Systems Inc. Message Board

  • edawizzard edawizzard Apr 15, 2009 10:07 AM Flag

    No change

    The EDA industry and in particular, CDNS is not making the difficult decisions they need to make in order to prosper when the economy recovers. Here is what they need to do in light of the fact that even when the economy recovers, chip design will never be what it once was. There will be fewer customers and the days of automatic retooling are over!

    1. Industry needs to consolidate – maybe only two major vendors
    2. Leading companies need to flatten organizations – most of those with VP and director titles and salaries are not deserving
    3. Need to cut portfolios of commodity products – many in the digital flow must go
    4. Need to cut the cost of sales – some of the companies have 3 or 4 sales people calling on accounts which is wasteful
    5. They need to innovate and this is surely possible if management allows it
    6. Need to go to a 100% ratable model to support financial predictability for Wall Street
    7. Stop holding the belief that chip companies can be successful with a single vendor, they can’t so do not believe it and instead focus on building products that can be differentiated
    8. Work at finding opportunities in adjacent markets
    9. Listen to you customers
    10. Support standards

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    • To see how sick CDNS is just do a search of Vice President as a current title for current Cadence employees on linked in. Just look at the number!

    • Well it could well may be flattened soon alright. I wonder if there'll be further cutbacks? ....

      • 1 Reply to eda200826
      • Well, if you look at their announced cost structure vs. revenue plan, the question of how long they will continue to run at a loss every quarter does come to the top of things to ponder.

        There is no way they made enough cuts and adjustments in the company last year to bring the expense rates into line with revenue. I'm still not sure what kind of silliness was going on there. Did they think they could fool shareholders with some absurdly optimistic outlook of recovery of revenue to return to profitability. At first I thought so, but then looking at their revenue plan for 2009 it leaves nothing but giant question marks. Oh I'm sure they are freezing wages, doing away with bonus payouts (at least for the rank and file), and limiting other types of spending, but they simply can't do enough through these measures.

        In the end, for the revenue sizing they are working to for the next year (and soft growth in outlying years), they need to cut another 10-20% of their cost structure to stabilize their balance sheet. Since labor is the dominant cost component in a company like Cadence, there is no choice but to layoff another 800-1000 staff. And yes, I agree that they have way too many VPs and directors for a company of this size and industry. That's what you get from an endless series of buying other companies for highly inflated prices, unless you are ready to make tough choices early on.

        My impression is that they continue to cut in the wrong places and in the wrong manner. They need to be wiping out entire chunks of subpar product offerings, and getting really lean and mean on the remaining pieces that represent the best value for customers.

        Will they do it? Don't know. It's not a remarkable management team in place at the moment, so there is no reason to expect remarkable decisions and results.

        Vote to change the board in the upcoming proxy. That is an excellent place to start a genuine long term change for the better. Shareholders need a Board that is not inept or timid about cleaning house and making real changes inside this very sick patient of a company.

    • A few comments regardling your list of line items to remedy.

      I agree, Cadence is not making difficult and necessary decisions for long term survival.

      It never has really. It is mostly just a continuing stream of management turn-over, retreads of business models tried before, with each cycle draining cash from the company for managements own pockets, and returning successively less value to customers over time. It's no wonder the company will be half the business in 2009 that it was in 2007. That's not the result of recession as the company was in free fall before the recession hit. The recession merely limits them from using their typical escape measures to survive to "appear" prosperous again in the future.

      Afterall, even before the current recession, Cadence had already collapsed from an artifical high of $1.6B a year to what appears to be something more on the order of half that size in less then 18 months time. You can review the quarterly financials and see this fairly easily. In CDNS case, this is not about the EDA market shifting, this is completely about CDNS making incorrect choices and decisions, pervasively and persistently. One has to wonder in CDNS case, what was happening and what was/is going on inside the company walls. You can do some napkin math and figure out that $1.6B was probably fiction, and everyone pretty well knows that growth at CDNS in this decade has been based largely on early renewals, price discounting, and rebundling and repositioning of both their product offering and their business model, with buyouts of competitors thrown in. At some point, reality catches up and significant corrections come about.

      CDNS has never been an innovator. The hodgepodge of products held together with string and springs and sold as a unified solution is living proof of that, as all customers know. It has built itself on a continuing series of purchases of other EDA companies. Sometimes, this was remarkably expensive, and the long term investments are now gone, or nearly gone (evidence the recent impairment write down). The point being that this particular company must aquire, as it does not innovate in any material fashion internally. However, CDNS is no longer in a position to aquire, so where does that leave it? Pretty much nowhere in terms of technology, innovation, and growth. There is nothing in this latest senior management team that can correct this. It is a downward spiral, only the speed and slope is open to question.

      At the end of the day, shareholders have to seriously ask themselves why they continue to hold stock in a company where shareholder value has materially declined over the last decade. Do we do it for our benefit, or for the benefit of the BoD and it's continuing series of failed management teams installed by said BoD? The only people getting rich off of CDNS are the BoD and the executives who continue to reap huge mounds of restricted shared grants and option grants. In that context, the new CEO and his "handpicked team" are doing what every other CDNS CEO have done. Look at the stock grants over the last 6 months in the companies public filings.

      You can vote for change in the upcoming proxy vote on board members. Shareholders need to stand up and fix the root cause (the board). However, the majority voting blocks of shares are held by a closely groomed and managed small number of large investors. So it is unlikely to happen. Vote change anyway.

      • 1 Reply to waywardsand
      • CDNS won't drop products from their portfolio. In the Logic Design space, other players dominate synthesis, test, static timing and formal analysis yet cadence keeps funding these money losing projects. This makes no sense and contributes to the ongoing quarterly losses. Likewise in the Manufacturing Sign-off sector they need to cut expenditures. Since 78% of holders are institutional & Mutual Fund Owners they need to get the message to Cadence to shrink and focus on custom design and logic verification and cut everything else.

 
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16.82-0.11(-0.65%)Jul 29 4:00 PMEDT

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