SAN FRANCISCO—EDA and IP vendor Synopsys Inc. said Wednesday (Feb. 22) it closed the $523 million acquisition of long-time rival Magma Design Automation Inc. and revealed that Rajeev Madhavan, Magma's chairman and CEO, would not be joining Synopsys as a result.
Few in EDA circles believed that Madhavan would join Synopsys as a result of the deal. Madhavan has been a fierce rival of Synopsys over the years, including engaging in a high-profile patent lawsuit that went to trial in 2006. Many believe that years of battles in court and the marketplace have bred personal animosity between Madhavan and Synopsys Chairman and CEO Aart de Geus.
Synopsys (Mountain View, Calif.), which also Wednesday reported quarterly results that exceeded analysts' expectations, said Madhavan would "be available for advice as we transition the company." Roy Jewell, Magma's president chief operating officer, will work with Synopsys on the integration of the companies, Synopsys said.
As per the original agreement, announced last November, Synopsys paid $7.35 per share to acquire Magma, or roughly $523 million net of cash acquired, the company said. Synopsys funded the acquisition using a combination of cash and debt, the company said.
Synopsys reported sales of $425.5 million for the quarter ended Jan. 31, up 9 percent from the previous quarter and up 17 percent from the year-ago quarter. The company reported a net income for the quarter of $56.69 million, or 39 cents per share, down 13 percent from the previous quarter but up 18 percent compared to the year-ago quarter.
On a pro forma basis, excluding charges, Synopsys reported a net income for the quarter of $82.3 million, or 56 cents per share, up from a pro forma net income of $68.3 million, or 44 cents per share, in the year-ago period.
Synopsys' results for the quarter, the first quarter of the company's fiscal year 2012, exceed consensus analysts' expectations, which called for sales of about $416 million and pro forma earnings of 52 cents per share, according to Yahoo Finance.
In a statement, de Geus said Syopsys' business for the fiscal first quarter was strong and broad-based. "Customers are aggressively moving to develop advanced new products, and demand for our technology and support is high," he said.
For the current quarter, Synopsys said it expects sales to decline to between $412 million and $420 million. The company said it expects to report income for the fiscal second quarter of 37 to 43 cents per share.
For the full year 2012, Synopsys said it now expects sales to be between $1.655 billion and $1.675 billion. The company said it expects to report earnings for the year of $1.33 to $1.48 per share.
Combined with a solid outlook for the rest of the year, our results allow us to raise our outlook for fiscal 2012, independent of any impact from the Magma Design Automation acquisition," de Geus said.
It is a good decision from Madhvan, as it do not look ethical professional behave to fight with someone for years and then start working with them. And if someone does that then he will be working against his sayings.
I wonder about that. Sure, in theory, I am sure a lot of companies would like to add Rajeev to their payroll. But Rajeev has been a CEO for more than 10 years. I don't see him becoming VP of marketing for another company. This is why, even if all the stuff about de Geus and Rajeev not getting along is not true, there is basically no room for him at Synopsys. They already have a CEO. Ditto Mentor. Now Cadence, if you believe the talk about Lip Bu Tan looking to replace himself and go back to being a VC and board member, that might be interesting. But it's difficult to see Rajeev heading Cadence, I guess in part because he has always been the little guy fighting against the big guys. And anyway, as mentioned above, there almost certainly is a non-compete agreement, so none of those scenarios can play out anytime soon.
Rajeev is going to want to take time off to spend with family. He's sacrificed a great deal of that kind of time for Magma and for Ambit. But a non-compete clause doesn't preclude him from angel investment. This is going to release a lot of investment funds for EDA. http://www.element14.com/community/docs/DOC-41831/l/magma-acquisition-will-light-a-fire-under-the-eda-industry
In theory, there is ample scope, yes, as I do not believe the levels of innovation in EDA have been nearly high enough in the last decade or so. In practice, I am not sure the traditional EDA company business model is exciting enough for investors. Making money out of software alone is very difficult.
I am sure that there was a non-compete agreement. I have a feeling Rajeev's next move is going to be something a little bit outside the box of what he has done so far. Kind of a Joe Costello-like maneuver. Don't know why. It's just a hunch.
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