SAN MATEO, Calif. In announcing its intention to purchase Simplex Solutions, Cadence Design Systems has set its sights on some key EDA and silicon architecture technology. But competitors question whether Cadence can still develop technology on its own, and note that recent acquisitions have brought Cadence a number of overlapping products.
Cadence Design Systems Inc. announced Wednesday (April 24) that it intends to purchase Simplex for roughly $300 million or $18 per share, in a deal expected to close in the third quarter of 2002. On the same day, Mentor Graphics Corp. announced plans to acquire Innoveda Inc., pointing to a wave of consolidation in the EDA industry.
Cadence picks up from Simplex key IC extraction and analysis technology and technologists, a system-on-chip design services group, and the forward thinking but as of yet unproven IC interconnect technology called the "X" architecture. The acquisition follows Cadence's purchase of signal-integrity provider Cadmos Design Technology Inc., design planning firm Silicon Perspective Corp., and routing specialist Plato Design Systems Inc.
The Simplex acquisition brings Cadence the Fire&Ice QX extraction technology, which Cadence was already reselling as a standalone tool for conventional "Manhattan-style" chip architectures. It also brings Cadence power and electromigration analysis tools.
"The merger of the two companies and two teams will accelerate Cadence's already very successful move to the forefront of design," said Ray Bingham, president and chief executive officer of Cadence. "Simplex is in our view the world's leading provider of extraction analysis solutions for digital IC design. The merger provides us with powerful, complimentary technology in the ever more crucial design-for-manufacturing space."
"With Cadence's strong global channel and technology investment in 0.13-micron and below, together we are able to deliver the best immediate and long-term solutions for our customers' most daunting technology challenges," said Penny Herscher, chief executive officer of Simplex Solutions Inc.
Saddled with investments in the X architecture, Simplex has had declining revenues and was not expecting profitability until 2003. For the quarter ended March 31, 2002, Simplex reported revenue of $9.9 million and a net loss of $2.6 million, compared to revenue of $11.7 million in the same quarter of 2001.
But even with financial losses, analysts have remained impressed about Simplex's technology.
"We believe that the acquisition is strategically positive as it brings Cadence a skilled technical and management team, superior IC analysis tools, and the X architecture," said John Barr, an analyst at Robertson Stephens. "We believe the integration will be smooth as Simplex and Cadence have worked closely together over the past several years."
"This acquisition is all about solving the 70-nanometer design problem, which is still a few years away, when the wall between design and manufacturing falls down," said Gary Smith, chief EDA analyst at Gartner Dataquest. "The tools that Simplex has been developing are niche right now. People that are really pushing the silicon need these tools, but most people don't yet. But when we get to 70 nanometer, that's when the whole world starts falling apart between the design and manufacturing interface."
Smith said he was encouraged by the management and R&D staffs Cadence picks up in the acquisition, noting that CEO Herscher, plus Simplex president and chief operating officer Aki Fujimura, and chief technical officer Steve Teig will all stay with Cadence and hold key executive positions. Herscher will become executive vice president and chief marketing officer, Fujimura will lead Cadence's Design for Manufacturing business, and Teig will become Cadence's chief scientist.
Some of Cadence's competitors said they were not impressed with the deal, however.
"This news is not a surprise, as these two companies were already in a distribution agreement," said Sanjiv Kaul, senior vice president and general manager of the Physical Synthesis group at Synopsys Inc. "Cadence is continuing to react to Synopsys' move to link the best front-end and back-end solutions. It will be interesting to see how they rationalize three incompatible routing solutions, two of which they bought in the last month, and one of which is 45 degrees out of phase."
"Cadence's buying spree, including the Simplex purchase, underscores a striking inability to develop technology organically," said Dennis Heller, head of marketing for Avanti Corp. "I don't think this purchase catapults Cadence into the forefront of technology, but they are probably better off having made the purchase than not."