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Synopsys on Growth Trajectory

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Synopsys Inc. (SNPS) has announced a particularly big deal win at the world’s second largest semiconductor foundry, GLOBALFOUNDRIES.

GLOBAlFOUNDRIES has been seeing some yield issues in recent times, particularly in situations of technology transition to smaller process geometries. This could be the reason it selected the Synopsys Yield Explorer.

This technology could be used for correction of systematic failure mechanisms, which is critical in enhancing the efficiency of the production process and driving the yield of new integrated circuits. This new technology is capable of reducing production bottlenecks and would therefore also increase cost efficiencies.

In the current economic scenario, as customers are strengthening their supplier relationships and focusing on cost efficiencies, many have selected Synopsys as their primary EDA partner.

Evidence of this is borne out by the further extension of relationships with companies such as Juniper Networks (JNPR), Realtek, Teradici, NetLogic Microsystems, Toshiba andWolfson. The stability of shared visions that are a part of these deep relationships with vendors and customers will be critical to driving the innovation and technology roadmaps for the company in future.

Apart from securing new business orders, the company is also focusing on introducing new products. Synopsys has also made a few strategic acquisitions to strengthen its product portfolio and improve its profitability.

Improved operating performance and cost-control steps enabled Synopsys to report an encouraging fourth quarter. The first quarter 2011 guidance is also encouraging.

The company is focusing on its operating performance and cost-control measures, which enabled Synopsys to report an encouraging fourth quarter. The company also announced the acquisition of Magma Design Automation Inc., a chip design software manufacturer, which is expected to boost profitability.

Synopsys’ product innovation strategy, the popularity of its time-based license model and its strong cash position make us optimistic about Synopsys. 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 (CDNS).

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

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