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Analysts give thumbs up to CDNLive!

Posted: 16 Sep 2005 ?? ?Print Version ?Bookmark and Share


Though there was nothing unanticipated about a group of new products, technologies and marketing tactics announced earlier this week by Cadence Design Systems Inc., industry analysts by-in-large applauded the No. 1 EDA vendor for following through with previously disclosed strategies and hosting a successful user conference, re-branded this year as CDNLive!

A sampling of some of the top EDA analysts conducted by EE Times revealed nearly unanimous approval of the Cadence moves, particularly the business strategies of introducing methodology kits and segmenting a portion of its product line with feature-based pricing. But while endorsing the strategies and direction Cadence set forth this week, analysts said the true test would be reception in the marketplace.

In a comment representative of the majority of analyst sentiment, Garo Toomajanian, EDA analyst for RBC Capital Markets (San Francisco), said nothing that he saw or heard during his visit to CDNLive! struck him as a potential negative.

"No red flags went up," Toomajanian said. "It looks like things are really coming together."

Gary Smith, chief EDA analyst at Gartner Dataquest, agreed, saying the strategies look solid. "I am comfortable that they [Cadence] are headed in the right direction."

As part of a flurry of announcements made Monday (Sept. 12), Cadence detailed a product segmentation strategy to offer a tiered range of products, giving customers the flexibility to choose the version of a product best suited to its capability needs and budget. This type of feature-based pricing is similar to the way scores of products are marketed in other industries ? Intel Corp. for example offers several different editions of its Pentium microprocessor, and Honda Accord customers have the option of choosing between LX and EX models.

Cadence will offer its platforms in three different levels ? "L" for lower-complexity designs, "XL" for higher complexity and "GXL" for leading edge.

The first platform to be offered in this fashion is Cadence's Encounter IC implementation system ? Encounter L and Encounter XL are available now, while Encounter GXL is expected to be available in the fourth quarter.

Cadence also announced Monday the availability of its first methodology kits ? products bundled with recommended flows, scripts, intellectual property, reference designs and applicability training targeted at specific applications ? as well as the company's new Physical Verification System for designs at 90 nanometer and beyond.

Analysts, who had been aware for months that Cadence was working on kits and segmentation while developing new verification technology, saluted Cadence for delivering on its promises, but cautioned that the official introduction of these marketing tactics does not necessarily make them successful.

"The proof is going to be in the pudding," said Tim Fox, technical software analyst at Deutsche Bank Securities Inc. (New York). "We don't know how well this will go over."

Fox said Cadence already has some experience with product segmentation. The Incisive Palladium II acceleration/emulation system, introduced as Cadence's advanced/high-end emulation offering in late 2004, has been very well received, Fox said. But, he cautioned, while Cadence was already the technology leader in emulation prior to Palladium II, the digital IC design space in which Encounter plays is fiercely competitive.

"That's going to be the challenge for Cadence," Fox said.

"The product segmentation is Cadence facing up to the fact that the RTL market is a mature market," Smith said. "They've got to re-package tools so that they can supply price point and capability where the market is."

In something of a dissenting opinion, Erach Desai of Desaisive Technology Research (Hingham, Mass.), expressed reservations about the segmentation strategy, saying that segmentation of products would result in segmentation of users ? something he thinks could cause problems among engineers, especially within the same company.

"You don't want to be an engineer and find out that another design team got the higher-end package," Desai said. "I don't think that works well in engineering."

Like Fox, Jay Vleeschhouwer, an analyst and vice president at Merrill Lynch (New York), applauded the Cadence strategies, which he and his firm support, but said the ultimate test would be impact on revenue.

Vleeschhouwer compared the methodology kit strategy to the phenomenon that has occurred in the packaged software market over the past few years, noting that Autodesk Inc., a CAD software vendor based in San Rafael, Calif., has succeeded with a vertical approach, targeting sets of applications toward specific end markets. Vleeschhouwer qualified his remark by emphasizing that Cadence and Autodesk play in completely different markets with very different volumes and price points.

Vleeschhouwer made one important distinction between the Cadence strategy and that which has been successful in related industries. In the packaged software realm, he said, bundled products are always less expensive than the cost of buying the standalone products separately. Cadence is not offering a "package deal" on products, but cost savings in terms of the efficiency and throughput of integration.

"We are a proponent of the [segmentation] idea because we have seen it work elsewhere," Vleeschhouwer said.

Vleeschhouwer pointed out that Fister is on Autodesk's board of directors and thus very familiar with that companies strategies.

Smith described the methodology kits as "interesting," saying that Gartner Dataquest is seeing various aspects of the design chain pushing up into vertical markets, including EDA, IP and semiconductors.

"The market of the future looks more and more like an application-specific market," Smith said.

The only shortcoming with the methodology kits, Smith said, is that Cadence does not include any embedded software ? something he believes the company eventually must do to succeed.

Smith and other analysts gave the bulk of the credit for the new strategies to Cadence President and CEO Michael Fister ? a longtime Intel executive who has held the top job at Cadence for just over a year ? and the rest of the management team.

"Not surprisingly, it shows a lot of the Intel vision," Smith said. "That is not a bad thing. Intel is one of the companies leading the semiconductor world into a new system-level market. By taking ideas that we see at Intel and applying them to an EDA company, there is no reason why that can't be successful."

Toomajanian said he sees the new marketing tactics as part of the implementation of Fister's vision. Toomajanian said he expects to see more of Fister's vision implemented as Cadence branches out into adjacent areas like design-for-manufacturing (DFM) and concurrent hardware/software design. Fister made clear mention of targeting adjacent technology areas, like automotive and aerospace, during a keynote address Monday kicking off CDNLive!

Dylan McGrath

EE Times

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