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Mentor posts record 4Q results

Posted: 30 Jan 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Dylan McGrath? Mentor Graphics?

Mentor Graphics Corp. reported a net income of $15.42 million on company-record Q4 revenue of $221.3 million, exceeding prior revenue guidance of $220 million for the quarter.

Mentor's net income of $15.42 million, or 19 cents per share, was down slightly from the $15.81 million that the company reported for Q4 of 2004. The net income was up substantially from the nominal net income of $159,000 that the company reported for Q3 of 2005.

Record Q4 revenue of $221.3 million was up 3 percent from Q4 f 2005 and up 55 percent from Q3 2005.

Mentor announced earlier this month that it expected to meet or exceed Q4 guidance.

Mentor's Q4 revenue exceeded consensus analyst expectations of $219 million, but the company's non-GAAP earnings per share of 42 cents fell short of consensus analyst estimates of 45 cents per share.

Mentor said Q4 order bookings were up 5 percent, including 20 percent each in Americas and Europe. Japanese bookings were down 38 percent and Pac Rim bookings were down 5 percent, the company said. Mentor said it posted record bookings for its Calibre product in the Q4.

Walden Rhines, Mentor chairman and CEO, described the fourth quarter of 2005 as "a quarter of records for Mentor." He said Mentor set company records in the quarter for revenue, overall bookings, bookings of Calibre (as well as nearly all members of the Calibre family), FPGA synthesis revenue and design-for-test revenue. The quarter was also a strong quarter for revenue from new customers, Rhines said.

For the full year 2005, Mentor posted a net income of $4.3 million, a substantial turnaround from the net loss of more than $20 million that the company posted for 2004. Mentor posted 2005 revenue of $705.2 million, down 0.8 percent from 2004 revenue of $711 million. After starting the year with two consecutive dismal quarters, Mentor posted strong bookings and record revenue for Q3. Company executives said all year that they were expecting a strong second half, and particularly a strong Q4.

Rhines said Thursday that the slow start was mainly caused by weakness in Calibre bookings. "The second half of 2005 more than made up for the slow start," Rhines said.

Rhines added that Mentor is even more confident in the long term growth potential of the Calibre family now that the company is seeing the results of what he termed the "third wave of Calibre application," design-for-manufacturing (DFM). Rhines called 2005 the first year of substantial DFM revenue, saying it contributed 5 percent of the company's total bookings.

"This third wave is likely to be the largest of all the Calibre waves," Rhines said. "And it's still in its infancy."

With most EDA contracts on a three-year cycle, 2006 looks positive for Mentor and the EDA industry in general, Rhines said, saying that companies have more R&D money to spend on contract renewals this year than they did in 2003. He said 2006 may be a "better year" for EDA, but acknowledged that that might mean overall industry growth of just 6 percent or so.

Mentor said it expects Q1 2006 revenue of approximately $170 million and expects to report a net loss of 6 cents per share based on generally accepted accounting principles (GAAP) for the quarter. For full year 2006, Mentor expects revenue of about $755 million and GAAP earnings per share of 18 cents.

Mentor's stock price climbed 45 cents, or more than 4.4 percent Thursday, closing at $10.65 ahead of the earnings announcement. The stock continued to trade higher in after hours trading following the announcement, at one point surpassing $11.50.

- Dylan McGrath
EE Times

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