Synopsys Strengthens VIP Portfolio


Synopsys Inc. (NasdaqGS:SNPS - News) recently completed the acquisition of privately-held software maker ExpertIO Inc. Financial terms of the deal were kept confidential.

ExpertIO is an independent provider of Verification Internet Protocol (NYSE:VIP - News) for storage devices. It specializes in software that is required for testing and debugging electronics in storage and networking devices. ExpertIO had been a technology partner to Synopsys for a long time.

Synopsys makes software that is used to test and develop chips. It has its own set of VIP protocols. This latest acquisition will go hand-in-hand with its capabilities, enhancing the existing suite of VIP protocols. Moreover, Synopsys’ intellectual property will also get enhanced by the addition of ExpertIO’s expert team.

The combined effort will bring in advanced VIP solutions that will enhance the SoC (System on Chip) designs. The ExpertIO acquisition is in line with Synopsys’ strategy of broadening its VIP portfolio to address the growing verification challenges that designers face while developing complex systems on chips (SoCs) to serve the demand for 'smart' electronics.

Strategic acquisitions have always been Synopsys’ ploy to strengthen its product portfolio. In 2011, the company made a number of acquisitions. In October, Synopsys completed the acquisition of privately-held electronic design automation (:EDA) company, Extreme DA.

In September, Synopsys completed the acquisition of a leading independent provider of VIP, nSys Design Systems Private Limited. With the acquisition of Virage Logic Corp. in 2010, Synopsys added embedded memories, including SRAMs (static random access memory) and non-volatile memory, logic libraries, embedded test and repair IP and configurable processor cores, to its IP portfolio.

One thing to note here is that Synopsys has shown no initiative to diversify to other lines of business, although its acquisitions have consistently built upon its core competencies, while enabling it to expand capabilities in adjacent areas. Additionally, taking over the same line of businesses will enrich its portfolio, while also reducing integration time and cost.

Synopsys delivered solid results in the fourth quarter, with good operating performance and cost control. The company also announced the acquisition of Magma Design Automation Inc., a chip design software manufacturer, which is expected to boost profitability. The first quarter 2011 guidance is encouraging.

We are encouraged with Synopsys’ product innovation strategy, the popularity of its time-based license model and its strong cash position. Although Synopsys is gaining traction from new products and acquisitions, we believe these will take some time to produce favorable results. Besides, the company is also facing competition from Cadence Design Systems (NasdaqGS:CDNS - News).

Synopsys currently has a Zacks #2 Rank (short-term Buy rating).

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