| SANTA CRUZ, Calif. — A move by Synopsys towards subscription licenses was the primary reason for the EDA industry's revenue decline in the third quarter of 2004, according to two analysts. Meanwhile, the analysts said, the combined market share held by the "big three" EDA vendors is declining. |
The analysts were commenting on the Market Statistics Survey (MSS) report issued by the EDA Consortium Dec. 22. According to the report, third-quarter 2004 worldwide EDA revenue was $953 million, a two percent year-to-year decline. Contributing factors included a nine percent decline in North American EDA revenues, and weakness in the IC physical design market.
Garo Toomajanian, analyst at RBC Capital Markets, stated in a commentary that Synopsys' license model change accounted for most of the decline. In the third quarter, he noted, Synopsys' subscription bookings grew from 80 percent to 93 percent of bookings. "We believe that total EDA revenue would have been about $35 million higher if Synopsys had not changed license models. This would have resulted in a 2 percent year-to-year growth," he wrote.
Jay Vleeschhouwer, analyst at Merrill Lynch, wrote in a commentary that the latest quarter reversed the previous six quarters of positive year-to-year EDA revenue growth. "It appears that a large part of the difference can be attributable to Synopsys," he wrote.
Vleeschhouwer also noted a declining market share among the "big three" EDA companies, including Synopsys, Cadence Design Systems, and Mentor Graphics. He said that the three largest companies had combined revenues of $694 million in the third quarter, or 73 percent of total EDA revenues, compared with 78 percent for 2003 and 81 percent for 2002.
Toomajanian noted that private company EDA revenue grew 5 percent year-over-year for the first nine months of 2004, and that smaller public companies — including Ansoft, Artisan, Magma, Nassda, Synplicity, Verisity, and Virage Logic — showed a combined 30 percent revenue growth in the first nine months of the year.
Vleeschhouwer's report noted that EDA revenue growth, or decline, varied considerably according to product category. In the computer-aided engineering (CAE) category, for instance, logic verification was down 5 percent year-to-year to $131 million, while analysis tools were up 17 percent to $97 million. Synthesis was down 16 percent to $63.8 million, while system-level design was up about one-fifth to $35 million.
IC physical design decreased from $295 million in the prior year quarter to $272 million, with fallbacks in IC placement and routing, floorplanning, and full-custom layout. But IC layout verification was up from $42 million to $45 million.
"A main inference from the new results continues to be that product mix matters with respect to EDA bookings performance and share, especially in an environment of only modest spending increases," Vleeschhouwer wrote.
Toomajanian predicted that EDA industry revenues will grow from zero to 2 percent in 2004, and zero to 5 percent in 2005. He wrote that the transition to 90 nanometers is not creating a significant demand for EDA tools, "since the new design technology requirements are only incremental in nature."