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Synopsys posts profit, revenue growth

Posted: 21 Feb 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Synopsys? profit? revenue? Dylan McGrath?

Top-tier EDA vendor Synopsys Inc. reported last week a net income of $1.7 million on revenue of $260.2 million for the first quarter of its fiscal 2006, which closed Jan. 31.

Net income of $1.7 million, or 1 cent per share in accordance with generally accepted accounting principles (GAAP), an improvement from net losses of $14.3 million and $11.1 million for the first and fourth quarters of fiscal 2005, respectively.

Revenue of $260.2 million for the fiscal first quarter was up 8 percent year-to-year from the $241.3 million that the company reported for the first quarter of fiscal 2005 and up 2 percent sequentially from $254.8 million in the fourth quarter of fiscal 2005.

The fiscal first quarter marked the fifth straight quarter of revenue growth for Synopsys.

The company said its revenue target for the second quarter was in the $262 million to $270 million range, and the company expects to report a GAAP net result in the range of a loss of 2 cents per share to an income of 3 cents per share. For the full year, Synopsys expects to report revenue in the range of $1.05 billion to $1.08 billion with GAAP net income of 5 to 17 cents per share, the company said.

Fiscal first quarter revenue and income were both within range of previous company guidance. Synopsys said last November that it expected to report GAAP results of between a loss of 4 cents per share and an income of 2 cents per share on revenue of $254 million to $262 million.

Fiscal first quarter revenue was slightly above consensus analyst expectations of $258.7 million. Synopsys reported a non-GAAP net income of 18 cents per share, exceeding consensus analyst expectations of 15 cents per share.

Consensus analyst expectations for Synopsys fiscal second quarter revenue, $263.6 million, falls on the low side of company guidance. Synopsys non-GAAP guidance for fiscal second quarter revenue of 13 to 17 cents per share is within range of consensus analyst expectations.

On a non-GAAP basis, excluding stock-based compensation expenses and other charges, Synopsys reported a net income of $26.4 million, or 18 cents per share, up from non-GAAP net income of $14.7 million for the first quarter of fiscal 2005.

Synopsys stock climbed 7 cents to close at $22.22 prior to the earnings announcement. The stock surged in after-hours trading following the announcement, at one point topping $23.

Exceeded internal targets
Synopsys chairman and CEO Aart de Geus said the company exceeded all internal financial targets for the quarter, including revenue, income, bookings and operating margin.

Regionally, 54 percent of quarterly revenue came from North America, with 16 percent each from Europe and Japan and 14 percent from the Asia Pacific region, according to Brian Beattie, Synopsys chief financial officer. Beattie said Japan showed the strongest growth during the quarter in terms of orders.

Noting that the hiring environment among customers seems to have improved, de Geus painted on overall optimistic picture of the health of the semiconductor industry, saying that customers are indicating that they see solid business conditions for the next six months.

"In 2001 and 2002, people learned the word caution," de Geus said. "But they've also learned how to manage inventories better."

According to de Geus, the move to 65nm process technology is accelerating, driven in part by a desire to integrate more functions into chips. This, he said, is driving the need for more advanced design tools. He added that Synopsys is currently tracking 161 65nm designs and has seen 52 65nm tapeouts to date, the majority, he said, employing Synopsys physical implementation tools.

Synopsys is experiencing a "very solid" upgrade cycle in physical design system from PC/Astro to IC Compiler, de Geus said. Some analysts have questioned whether customers are migrating to IC Compiler or whether they can continue to get by with PC/Astro. According to de Geus, Synopsys is on track to hit its goal of 80 percent migration to IC Compiler within three years.

While de Geus stressed that revenue grew across all product categories, he indicated that design-for-manufacturing (DFM) revenue continues to grow fastest within the company. He referenced Synopsys' recent acquisition of HPL Technologies Inc., saying it would strengthen the company's product offerings in DFM by through direct access to the yield data needed to reduce systematic defects.

While Synopsys' main EDA rival, Cadence Design Systems Inc., has in recent months been moving to segment its product line and offer design "kits" targeted toward end user applications, de Geus suggested that Synopsys will not follow suit. For one thing, he said, Synopsys has been doing what Cadence is doing through segmentationoffering different levels of functionality for different price pointsfor years.

While Cadence has begun offering methodology kits targeted to end user applications such as wireless and RF, de Geus said Synopsys takes a different tact, providing a set of tools targeted toward specific problems, such as power consumption, which impact many applications.

"If you want to have a 65nm, low-power process, come to Synopsys," de Geus said. "If you want to call it a kit, it's fine with me."

- Dylan McGrath
EE Times

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