MOUNTAIN VIEW, Calif. - By announcing strong results for its first fiscal 2000 quarter on Thursday, Synopsys Inc. may have reassured investors left jittery in the wake of the recent sharp decline in Synopsys' stock price. At the same time, however, Synopsys lowered its expected revenue increases for fiscal 2000 from the 18-to-20% range down to an 11-to-13% range.
Synopsys' stock slid from a December high near $75 to the mid-$40 range in late January, and has remained there since. Analysts cited concerns over increased competition, turnover in upper management, and general unease about the EDA industry, which grew only around 6% in 1999.
Synopsys' shares took a sharp one-day hit on Monday following a report by Erach Desai, an analyst at Credit Suisse First Boston, which stated that Synopsys would have to lower its revenueguidance for 2000. Desai expressed concerns about a lower-than-expected EDA growth rate, price erosion due to competition, and delays in purchases of physical synthesis due to marketplace
For the first fiscal quarter ended Jan. 31, Synopsys reported revenue of $216.9 million, a 20% year-to-year jump over the same period of 1999. Net income was $45.1 million, or 61 cents per share.
In a conference call, Aart de Geus, chairman and CEO of Synopsys, expressed confidence that Synopsys can continue growing 3-to-5% faster than the overall EDA industry. But de Geus lowered Synopsys' original prediction of EDA industry growth in 2000 from 15-to-18% to a more modest 7-to-10%. Synopsys' original growth target was unrealistic, de Geus said.
On the bright side, said de Geus, Synopsys has over 50 customer engagements with its Physical Compiler product; has seen huge gains in test, FPGA synthesis, simulation, and timing analysis; and
is approaching a $50 million run rate with formal verification.
"We have put in place a solid business model we believe will pave the way for long-term growth," de Geus said. "The area we clearly have room to improve is Wall Street."
Desai said that Synopsys' lower expectations probably won't scare off investors. "I think there will be a sigh of relief that they set a bar they can reach," he said. "They're well positioned, and the stock is undervalued relative to most obvious market benchmarks."
Today, Synopsys' shares fell 17%, to $38.50 in morning trade on the Nasdaq stock market, according to the Reuters agency, as analysts lowered their earnings estimates and target prices for Synopsys stock.