well synopsis announced their 2nd quarter numbers and here's a quick comparison:
quarter ending 4/30/09 3/31/09
revenue 336.8 mil $206 mil
next quarter est $342 mil - $350 $205 mil - $215
net income/share $0.41 $(0.10)
next quarter est $0.40 - $0.42 $(0.24) to $(0.22)
full 09 yr sh est $1.62 - $1.72 $(0.89) to $(0.77)
full 09 year est $1.35 bill - $1.38 $830 mil to $870
so for next quarter, snps expects approx $137 mil more in revenue then cdns. for the full year snps is expecting $500 mil (yep, that's half a billion dollars) more in revenue.
so, i'm sure snps is eating into their backlog to support the numbers and cdns is probably trying to build up a backlog which is eating into their numbers, but to the tune of a half a billion dollars difference!! that basically means only one clear thing, snps is seriously taking market share from cdns. add to this, cdns is discounting their tools to nearly giving them away.
i have yet to see any sign that cdns is doing anything to change this. the choice of their current CEO doesn't show any attempt at regaining market share, he's basically a chinese finance guy with no experience running a large company and little experience (if any) in the EDA world. there have been superficial cuts in head count, but the cuts have not been in the upper management, so this just says that they're keeping with the status quo.
does anyone see anything that they, cdns, is doing to re-capture market share? or doing something that would allow them to raise tool prices, ie adding value to the existing products??
i would like to see an upside to cdns, but i just cannot see any.
Most of us have already answered that question with our respective opinions in previous threads.
At the core of the problem is a company that remains unwilling to make tranformative change to address the realities of the EDA market, competitors positions, and the fundamental sickness from multiple years of discounting and pulling early renewals from their future.
The Cadence model is to aquire their way out of such trouble. The problem being the company is flat on it's back, it's not an aquisition environment, and there is little they can aquire.
Cadence must become gut level honest with themselves about their product family, weed it out, thin it out, and get very good at maintaining and advancing what they retain. That requires large transformation in their R&D organization, yet their R&D is now led by a group of promoted incumbents that frankly were part of the problem, so I have no idea how they can be part of the solution.
Transformative change needs to happen if this particular EDA company is going to ever thrive again. It will be smaller then it is today, but more vibrant, profitable, and with real upside potential in EDA. I disagree that it needs a 50% RIF. More like 20-30% coupled with real hard choices on which products to just shoot in the head and bury somewhere.
My guess however is that pride at Cadence has frozen them, and precludes them from doing this level of change. To collapse from number 1 in their market to effectively number 3 in a two year period is just too much for this board to reconcile I'm afraid. A new board is required. The new CEO is a non-starter in my view, being basically a semi successful venture capitalist whose successes are limited to Asia. The CEOs management team are a group of second tier encumbents who stepped into their prior managers office, bringing with them all the thinking process and errors that led to the collapse of this company. That's not an environment for transformation of a company, that's more of the saem. More of the same will kill this company over the next several years.
You don't have to like it, but that's pretty much what there is to observe and comment on.
This company is a strong sell until transformation takes place.
Edais dead said it well.
Digging deeper just look at:
You will see many products that are me too here.
SNPS holds the market share lead here in this segment so CDNS will always be in catch-up mode. You can't make money in this mode.
For example, look at Test, this is old retread technology from IBM that has never been accepted by the market. Just think if they took all the folks working on the me too products or dogs like test and placed them in areas where CDNS could exploit!
Same holds true with DRC. CDNS has been trying to get a working product for years but has failed.
Put the R&D folks in logic and system verification and analog!
As Wizard has said before, most of the cadence products falls in "me too" category and I doubt if they would be getting ROI in those product lines. Take for example their physical verification system. How on earth do they think they can compete with Calibre? Same applies to the likes of RTL compiler, encounter timing system and system package/board design products. I gather they make these products just to cut the competitors market share. In long run this is only going to bleed more dollars for cadence or even if they dont bleed, it would be wasteful utilization of their financial resources. Here are my suggestions to cadence management, if they care to listen:
1. Get your focus back. Stick to your core strengths (products where you are at number 1 or even number 2). Anything below that is just a waste of money.
2. Improve the quality of your tools.
3. Be a healthy competitor
Say not to selling tools at huge discounts with sole intention of replacing the customers. Bigger pies does not necessarily translate to bigger profits.
4. A lean and mean work force.
5. Cut wasteful expenditure, you are still doing a lot of it.
You're correct I believe.
CDNS does not have the tools to support high prices. The only exception is Analog design.
Until CDNS becomes like the auotmakers and retools their company, they will continue to lose money.
edawizard, you seem to have strong opinion about Cadence's situation and direction. Would you care to provide data to support your claims and conclusions?
I would not rule out possibility of you and some other posters being employees of one of the Cadence's competition starting and ending with the same letter. I can not imagine someone who does not believe in a company's stock/future spends a lot of time on its message board to post a lot of apparently well thought out negative articles in form of posts. What is your investment position with Cadence? long or short?