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How will Tan lead Cadence's resurgence?

Posted: 13 Jan 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Cadence? EDA? Tan CEO president?

Tan: I always believe the best product wins. Technology will be critical .

Nearly three months after the resignation of Cadence Design Systems Inc.'s controversial CEO Michael Fister, the company's board appointed one of its own to the top job, saddling him with the daunting task of leading Cadence's resurrection.

Lip-Bu Tan, 49, was unanimously elected last week (Jan. 8) to the position of president and CEO after serving on the Cadence board of directors since 2004, where he has been a member of the board's finance and technology committees. He has spent most of his career as a venture capitalist, serving on numerous boards. His educational background is in nuclear engineering.

Tan essentially served as Cadence's acting chief since Fister resigned, joining two others in the interim office of CEO and leading the company's third quarter earnings call last month.

No.1 no more
Tan takes the helm of a company coming of a disastrous 2008. Last year, Cadence experienced revenue declines that knocked it from the No. 1 spot in EDA that it held for most of the past two decades. In addition to the October resignations of Fister and four other top executives, the company endured a failed attempt to acquire Mentor Graphics Corp., a postponed financial filing, an accounting review and a major round of layoffs.

"We are very delighted that 2008 is over and the worst is behind us," Tan said.

Tan wouldn't characterize Cadence's long-term goal as regaining the top spot in EDA revenue, which it lost in 2008 to Synopsys Inc. Instead, he said, Cadence would concentrate on a long-term strategy of enhancing shareholder value through performance. The company will focus on being "the total broad solution provider to enable customers to design and create," he said.

Rich Valera, an analyst with Needham & Co., said reclaiming the mantle of No. 1 EDA vendor was not a practical goal for Cadence without a pretty substantial acquisition and not something the company should focus on right now.

Tan emphasized that his strengths lie in building the right team and making decisions. He said he has extensive relationships with Cadence customers through his 28 years of experience investing in the semiconductor industry. He said Cadence would focus sharply on product development.

"I always believe the best product wins," Tan said. "Technology will be critical."

'Rock star' CEO
Early reaction from the EDA community to Tan's appointment has been cautious. Valera said those who expected Cadence to bring in a "rock star" CEO!an ideal, high-profile executive with deep EDA experience and a track record of running a large software company!would be disappointed with Tan's appointment. But Valera said none of the EDA veterans rumored to be under consideration would have been a perfect fit. He noted that Tan had an advantage in that he was intimately familiar with Cadence from his four years on the board and three months in the interim office of the CEO.

"I don't think there was the ideal candidate," Valera said. "In some ways [Tan's appointment] is a little underwhelming, but I don't think he is going to screw anything up."

Tan said he did not immediately aspire to take over as the Cadence CEO following Fister's resignation. After the board decided to make a management change, he said, he offered to step into the interim office of the CEO (along with John Shoven and Kevin Palatnik) while the board undertook an "extensive" search for a new company leader. The board looked at a number of candidates across the EDA and semiconductor spectrum and, in the end, persuaded him to take the job on a permanent basis, Tan said.

Valera said he believes Tan is a solid leader for Cadence, particularly at this point in the company's history, when it must focus on digging itself out of a deep hole. He noted Tan's strong educational background and history of leadership and success in the venture capital business. Tan is not exactly an EDA outsider, having served on the Cadence board for four years, Valera said.

"I frankly would have liked to see someone with more experience running a large software company," Valera said. "My perfect candidate would have had more operational experience. But I think [Tan] is a very capable guy, very smart. He seems like a very motivated, hard-working guy with a good track record."

An EDA guy?
John Cooley, moderator of EDA tool users' site, had been among those calling for Cadence to appoint an EDA veteran to the top job. In a posting Jan. 8, Cooley said although Tan "doesn't come from an EDA background, as a five-year member of the Cadence board, he's not a totally clueless newbie to EDA, either."

Asked if he was "an EDA guy," Tan pointed to his role on the board's technology committee, relationships in the semiconductor industry and business experience. "I think I know enough to be challenging the engineering team," Tan said.

Gary Smith, head of Gary Smith EDA, said it was too early to evaluate Tan's appointment. One of the potential problems with it, he said, is that the board of directors was the focus of a lot of the questions surrounding Cadence last year.

However, Smith drew a parallel to Tan's appointment and that of former Cadence CEO Ray Bingham in 1999. Bingham also assumed the post as a Cadence insider, having served as a board member and chief financial officer. "And Ray did a great job," Smith said.

"The other problem is that if they are going to survive they are going to have to change the direction of the company," Smith said. "They probably have to get out of some product lines and reinvest in the future. That's a hard thing for an insider to do." Smith said last October that he didn't know if Cadence could save its IC CAD group.

Tan said Cadence would "continually review the product portfolio and make adjustments when we have to," but said the company is not on the verge of cutting any specific product lines. He said the company would focus on driving product development and technology, mentioning Cadence's mixed-signal design product franchise as well as low-power design, verification and design at advanced process nodes as particular areas of focus.

"So far I think we are going to stay the course," Tan said. "I think so far we are in good shape."

Lessons from basketball
"I think it's fair to say they needed to sharpen their R&D focus," Valera said. "There are definitely some areas where they have to almost double down or throttle back." Valera added that a wholesale exit of some product areas is "probably not likely or the best solution" for Cadence.

Cadence in November split its R&D function into two groups, implementation products and front-end, naming Chi-Ping Hsu and Nimish Modi, respectively, to head them.

Tan said he was a basketball player and drew parallels between the way he would structure Cadence as CEO and the building of the Boston Celtics, the 2008 National Basketball Association champion. He said Cadence would be keeping some of its proven veterans (like the Celtics did with players Kevin Garnett and Paul Pierce) and putting new people!like Modi!in place. "Teams win games," Tan said. "We are going to gel together as a team."

One of the most frequent criticisms of Fister was that he often seemed aloof, avoiding appearances with fellow EDA CEOs while Cadence scaled back its participation in events such as the Design Automation Conference in favor of its own CDN Live! user event. Walden Rhines, chair of the EDA Consortium (EDAC) and Mentor's chairman and CEO, said he hoped Tan would participate in the broader industry.

"I would certainly welcome him to the EDA community and I'm hopeful that he will actively participate in EDAC and other activities that the industry works on to improve our industry for our customer base," Rhines said.

In his posting last week, Cooley said Tan could be the right medicine for a restored Cadence, or a continuation of Fister's "let's-milk-this-cash-cow" policies. Like U.S. President-elect Barack Obama, Cooley wrote, "I think his first 90 days in office will say everything we'll need to know."

"Cooley gave him 90 days," Smith said. "I think I'll give him nine months. This isn't an easy thing to fix."

- Dylan McGrath
EE Times

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