Synopsys Inc.'s (SNPS) Taiwanese arm is now set to acquire chip-design software provider SpringSoft, which marks the fourth acquisition by the company year to date. Taiwan-based SpringSoft was established in 1996 to develop VLSI (Very-large-scale integration) chip design and debugging software.
The acquisition, which is expected to be completed by Synopsys’ first quarter 2013 earnings announcement, is valued at NT$12.2 billion, which translates into $406.0 million. The transaction is expected to be slightly accretive to fiscal 2013 non-GAAP earnings per share.
Synopsys develops software used to design, test and manufacture semiconductor chips. SpringSoft’s offerings will therefore complement its existing capabilities, enhancing its existing suite of chip design solutions. The combined solutions will help its customers to better address complex design requirements, thereby creating room for more demand.
Strategic acquisitions have always been Synopsys’ plan to strengthen its product portfolio. In January 2012, the company acquired privately-held software maker ExpertIO Inc. Then, RSoft Design and Ciranova were acquired in May and July, respectively.
One thing to note here is that Synopsys has shown no initiative to diversify to other lines of business, although its acquisitions have consistently boosted its core competencies. Additionally, taking over similar businesses enriches its portfolio, while reducing integration time and cost.
Synopsys’ healthy net cash balance and free cash flow position will allow smooth funding for further acquisitions. Also, Synopsys’ product innovation strategy, the popularity of its time-based license model and its tie-up with Advanced Micro Devices Inc. (AMD) are positives. But stiff competition from Cadence Design Systems (CDNS), a challenging technology spending environment and uncertainty regarding proper time to realize acquisition synergies keeps us on the sidelines.
Synopsys currently has a Zacks #3 Rank (short-term Hold rating).
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