Innoveda, Verisity report sharply different third-quarter revenues

Innoveda, Verisity report sharply different third-quarter revenues
By Michael Santarini and Richard Goering, EE Times
October 23, 2001 (8:36 p.m. EST)
URL: http://www.eetimes.com/story/OEG20011023S0019

SAN MATEO, Calif. — Innoveda Inc. and Verisity Ltd., two EDA vendors whose stock prices plunged in the third quarter, said they met their expectations for the quarter. But while Innoveda recorded a year-to-year revenue decline and a $34.8 million net loss for the third quarter, Verisity's revenues were up 63 percent compared with the previous year's quarter.

Innoveda, which now struggles with a stock price just below $1 per share, met lowered third-quarter revenue and earnings expectations, reporting revenue of $20 million and a quarterly operating loss of $2.9 million.

Meanwhile, Verisity's third-quarter revenue was $9.8 million, compared with $6 million for the third quarter of 2000. The company's net income was $1.3 million.

Earlier in the quarter, in August, Innoveda warned that third-quarter revenue would come in around $20 million and had expected operating losses before amortization and unusual charges to be $3 million to $4 mil lion. In August, Innoveda laid off roughly 25 percent of its staff and killed its MCM and schematics-based FPGA tool lines to focus on its core competencies — high-speed printed-circuit-board and systems design tools.

And on a third-quarter conference call with financial analysts, Will Herman, president and CEO, indicated that the cutbacks have paid off, saying that the company expects to return to profitability in the fourth quarter of this year.

"This restructuring has better positioned the company for what we see as a tough year ahead for our customers," said Herman. "We now feel we have the right technologies, focus and expense base as we move forward to generate revenue and profit growth."

Herman said that high-speed pc-board and systems design tools led third-quarter sales and that the company's cabling design business also picked up with a big win from Lear Corp. Innoveda picked up $5.3 million and a noncash asset impairment charge of $32.9 million, apparently for the killed product lines.

Verisity said it expects revenue of around $38.6 million for 2001, exceeding the guidance it originally gave at the beginning of the year.

Moshe Gavrielov, Verisity CEO, said in the company's conference call that bookings and orders for Verisity's functional-verification tools remain strong. But he noted that sales cycles have lengthened, and that purchasing approvals are harder to get. "We have customers in a lot of pain, and it does require us to prove that our tools are essential," he said.

In the third quarter, Innoveda's stock lost nearly 75 percent of its value, while Verisity lost 53 percent. Verisity took a hit because the "lockup" period following its IPO expired Sept. 17, the day the markets opened following the Sept. 11 terrorist attacks. Both companies saw some gains following the close of the third quarter. On Oct. 22, the day both companies announced their results, Innoveda closed at 92 cents and Verisity closed at $8.72.