The current U.S. economy is frozen, like a deer caught in headlights. Much of the freeze-up is due to the immediate gut reaction to the "unforeseen" plunge in the stock market and the downward spiral of many stocks to one-tenth of their valuations. Unfortunately, many of those companies, which were highly overvalued in the first place, are among the largest purchasers in the electronics marketplace.

However, productivity in the United States, although slightly eroded, still is phenomenal. We just need to rewind those insane views, and we'll again reach a stable point for growth-perhaps in a year or so-because the second-order effects of inflation or layoffs have yet to ripple through the system.

Lacking Washington's intervention, EDA and other companies are buckling down, cleaning house and dropping their quarterly numbers. Managers are taking their lumps.

Still, our services operation grew 60 percent, year over year, in the first quarter. People still buy knowledge and wisdom. For EDA customers, the challenge is to get a handle on what's happening with their end-target markets. For example, semiconductor design times have stretched out. That doesn't mean fewer products are coming out the door; rather, products are being differentiated in places other than on the chip-in software, programmability and better inclusion of systems.

R&D budgets are often frozen-or even beefed up in bad times-but not cut. In terms of our business, however, there certainly are tighter reins-no more closing deals outside the budget. The way we deal with it is to spend more of our energy on major accounts-those that can't afford not to have EDA tools.

There's no question, if you have highly differentiated technology, nothing else matters. EDA is so simple that way. If you have a huge technology lead, your offerings are going to be purchased. Once people buy lead technologies, chances are they'll look at and buy other tools in the leaders' lineups.

So where are we now? Compared with the first quarter, the second quarter is stable, but there's a lot of uncertainty. We're in a U-shaped curve, not a V-shaped one, and the depth of the curve is mild. Everything must cycle through, but that will happen fairly quickly in the next two to two and a half quarters.

The bottom line: We've got about a year to go to stabilization and a relative upturn. EDA industry revenues will be 10 to 12 percent higher in 2001, not the 22 percent some expected. Two years from now, we'll look back and say, "The 2001 downturn was a surprise, a historical blip."