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Cadence plans restructuring, tips DFM initiative

Posted: 07 Feb 2005 ?? ?Print Version ?Bookmark and Share

Keywords:verisity? emulation? dfm? design? manufacturing-aware?

Buoyed by strong fourth-quarter results, Cadence Design Systems Inc. is going into 2005 with a new organizational structure and a stealth-mode initiative, dubbed Catena, aimed at &quote;manufacturing-aware&quote; design. The restructuring, however, will cost some 200 jobs.

This information came to light during Cadence's analyst conference call Thursday (Feb. 3). Cadence executives continued to say little about the pending acquisition of Verisity Inc., noting only that the acquisition is under regulatory review and is expected to close around the end of the second quarter.

Cadence reported fourth-quarter revenues of $343 million, up 10 percent from the prior year quarter, and 2004 total revenue of $1.2 billion, up 7 percent from 2003. Net income in 2004 was $74 million. Fourth-quarter bookings were reduced, executives said, because Cadence declined to close some business in order to get more value for its technology.

"We're very excited," said Mike Fister, Cadence president and CEO. "The fourth quarter capped a strong year for our company. We not only reaffirmed our leadership, but we executed very well in a challenging environment."

Cadence is optimistic about 2005. The company expects total revenues between $1.24 and $1.30 billion, and expects that bookings growth will approximate revenue growth. Cadence's bookings outlook for 2005 includes Verisity, however, causing two analysts to ask whether there would have been any bookings growth without Verisity. The answer to this question was "yes."

The restructuring, said Fister, will take disaggregated R&D and marketing organizations and combine them into a central core. "This will allow us to streamline the company, and give as an opportunity to operate very efficiently," he said.

In an interview after the call, Ray Bingham, Cadence chairman, noted that the company had been built around vertical business units during the past four to five years good for jump-starting product lines, but not very efficient in the long run, he said. Each unit had its own marketing and R&D operation. The business units will remain, but the marketing and R&D will be centralized going forward.

The resulting layoffs, he said, will primarily be in North America. Cadence's year-end head count was around 4,900.

During the call, Fister described Catena as a code name for technology that lets customers move "seamlessly between design and manufacturing." He said Cadence is engaging in pilot projects with customers this year and expects broad deployments in 2006.

Bingham declined to elaborate on the content of Catena, but he noted that all of the technology was developed internally at Cadence. That's a significant move for a company that has largely grown by acquisition in recent years.

Meanwhile, Bingham said Cadence has just completed filings with regulatory agencies in the U.S., Canada and Germany regarding the Verisity acquisition. He doesn't believe product overlap will be a problem. Bingham said that Verisity's Axis product line, which provides acceleration, is "quite complimentary" to Cadence's Palladium line, which provides emulation.

"The distinction is clearly made by customers, and acceleration is something we just didn't have," Bingham said.

- Richard Goering

EE Times

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