Updated: Mentor's loss wider than anticipated

SAN FRANCISCO—EDA vendor Mentor Graphics Corp. Wednesday (Nov. 19) reported a fiscal third quarter net loss 6 percent wider than expected as recently as last week—when the company slashed its guidance for the period, blaming slowing customer activity and a significant tax provision.

Mentor (Wilsonville, Ore.) said its loss for the quarter ended Oct. 31 was $78 million, or 85 cents per share, based on generally accepted accounting principles (GAAP). On Nov. 11, Mentor said it expected to post a GAAP loss per share of about 80 cents, including a tax provision of about 50 cents per share.

Mentor had said previously that the tax provision, which ended up being 55 cents per share, is abnormally high because it includes recapture of tax benefits previously claimed in prior quarters as well as the continuing effect of tax expense in non-US jurisdictions.

Mentor had originally estimated a GAAP net income of 3 to 8 cents per share. The company reported a GAAP net loss of $8.8 million, or 10 cents per share, for the same period of 2007.

Mentor reported a non-GAAP net loss for the quarter of $3.7 million, or 4 cents per diluted share.

Revenue for the fiscal third quarter was $185 million, in line with last week's guidance cut, Mentor said. Prior to cutting its outlook, Mentor had been projecting quarterly revenue of $220 million. The company posted revenue of $190 million for the same period of 2007.

Mentor Chairman and CEO Walden Rhines told analysts on a conference call following the earnings announcement that, athough the worldwide recession is likely to be the most severe of any in recent history, "the recession in the semiconductor industry is likely to be shorter and less severe than many expect." Rhines cited relatively modest industry capital spending in recent years, significant capital spending cuts in the immediate period before the recessions and average selling price decreases on chips in the past two years.

"For the EDA industry, as always, one would expect a less severe downturn than for our customers, because design is normally the last area to be cut," Rhines said. "This is not just because of the value of designer staffing stability, but it's also driven by the need for new products whenever the recovery comes."