Sequentially, overall EDA revenue for the first quarter was down nearly 8.3 percent from the $1.078 billion that the industry posted for the fourth quarter of 2004, typical of sequential drops between the fourth and first quarters.

EDAC's Market Statistics Service said total first quarter product revenues, without services, were $912 million, down slightly from $918 million in the same quarter of 2004.

Walden Rhines, EDAC chairman and chairman and CEO of Mentor Graphics Corp., said, "Flat revenue is disappointing whenever it occurs, and this is about as flat as you can get."

Rhines said the flat quarter could be partially attributed to the general malaise of the IC industry, but that the EDA industry needs customers to start adopting new methodologies in order to see significant growth.

"Right now, the number of designs is not growing much, though complexity of designs is growing," Rhines said. "We need more people doing more complex designs so that they adopt more methodologies and tools."

Rhines highlighted some areas of strength for the fist quarter. He said revenue from system-level design was up 20 percent over the year-ago quarter. In the analog and mixed-signal category, Rhines said analog revenue was down more than 10 percent, but that was more than offset by 25 percent growth in mixed-signal. Emulation was up more than 40 percent and printed circuit board (PCB) design tools up 25 percent, Rhines said.

In the back end, Rhines said auto place-and-route revenue was down 25 percent, something he attributed to overall weakness in the ASIC sector.

Rhines pointed the MSS report's hiring data, which indicated that EDA employment was up 6 percent versus the year-ago quarter, as evidence that the EDA industry remains confident about future prospects. However, he noted that the employment figure is actually down slightly from the fourth quarter of 2004.

EDA's largest tool category, computer-aided engineering, generated revenue of $464 million during the first quarter, down about 1 percent from the year-ago quarter, EDAC said.

PCB and multi-chip module revenue increased was roughly $87 million, up about 3 percent from the year ago quarter, EDAC said, while physical design and verification revenue was $279, down about 2 percent from the first quarter of 2004.

The EDA industry's semiconductor intellectual property revenue of $82 million was up 5 percent, thanks partly to new company participation, the report said. EDA services revenue was $77 million, up about 1 percent the first quarter of 2004, EDAC said.

Revenue from the North America region was $449 million (down 3 percent from the year-ago quarter), followed by $242 million from Japan (up 2 percent), $180 million from Western Europe (essentially flat) and $119 million from the rest of the world (up 2 percent).