"Over the past two weeks there has been growing speculation [on Wall Street and in Silicon Valley] that Synopsys may be looking to acquire PDF Solutions," analyst Erach Desai of American Technology Research said in a report. "PDF Solutions has some strategic and unique technology in the design-for-yield arena."

Several other industry sources, however, said they doubted any such acquisition was in progress. One said that if there was, PDF would probably carry a higher price tag than the $480 million cited in Desai's report. Both Synopsys and PDF Solutions declined to comment.

Desai said Mentor Graphics Corp. should consider buying PDF Solutions — not Synopsys. "We believe that Mentor would be the best strategic fit because Mentor best understands DFM and has the Calibre-plus platform to leverage PDF's technology," he said.

PDF Solutions, based here, provides yield management software based on what the company calls a "gain-share" model. This is a pay-for-performance system in which PDF Solutions makes money only when it lowers chip-manufacturing costs for customers.

The company operates in the emerging but fragmented DFM market, which is in the consolidation phase. Last year, PDF Solutions purchased enterprise yield software vendor IDS Software Systems Inc. for roughly $50 million in cash and stock. It also purchased WAMA yield technology and associated business in an all-cash transaction from WaferYield Inc. (see June 19, 2003 story).

Synopsys has also acquired DFM companies. For example, it last year acquired Numerical Technologies Inc., a provider of software for lithography-enabling applications. The deal was worth $250 million. The combination of Numerical and Synopsys will accelerate the shift towards DFM in chip production, according to the companies (see March 4, 2003 story).